Hypercom Confidential

Colleen Smith claims her boss at Hypercom Corporation raped her. The company says it wanted to make things right. So the human resources director started hitting on her.

Colleen Ryan Smith claims she was raped three times by a top executive of Phoenix's Hypercom Corporation. The Scottsdale resident was one of Hypercom's 1,000 employees, about 500 of whom work in the Valley.

Hypercom is a big, if little-known, company. Its revenues reached nearly $200 million in 1997. Hypercom is the world's second-largest producer of the devices through which retailers swipe credit and debit cards to verify authenticity.

Smith, who was the executive's personal assistant, didn't report the alleged attacks to police. But other Hypercom executives heard rumblings about those attacks -- and other alleged sexual improprieties involving the executive -- and decided to investigate before an impending initial public offering of company stock.

Jairo Gonzalez (above) was the president of Hypercom Corporation's international division until recently. George Wallner (left) co-founded the Phoenix-based firm.
Jairo Gonzalez (above) was the president of Hypercom Corporation's international division until recently. George Wallner (left) co-founded the Phoenix-based firm.
George Wallner co-founded the Phoenix-based firm.
George Wallner co-founded the Phoenix-based firm.

Or, if you believe her lawyer, Hypercom tried to buy Smith's silence.

While this was unfolding in late 1997, the Hypercom human resources director assigned to investigate the case began writing Smith love letters and sending her gifts.

Smith was in the throes of a messy divorce. The company promised to pay her divorce lawyer's fees. To pay off her home mortgage. To put her two sons through college. The company vowed to ensure her alleged assailant would never repeat his actions.

All she had to do was sign a contract to keep her deal quiet. Smith says she had no problem with that. Though devastated by the assaults, she hadn't told Hypercom about them -- the company had come to her.

Colleen Smith signed the confidentiality agreement and continued working for Hypercom in a different department. The executive allegedly was "reprimanded" by the company's co-founder.

Hypercom's IPO in November 1997 was a rousing success, garnering the company $125.7 million.

Life went on. Then, one day in the summer of 1998, Smith overheard two fellow employees discussing the payoff she'd gotten, and her confidentiality deal. She hired a lawyer, then sued the company for violating the confidentiality agreement, and other misdeeds.

Hypercom countersued, saying that she had broken the secrecy deal and should be ordered to repay the company all the money it had paid her.

A Superior Court judge is hearing the case.

Colleen Ryan Smith answered the doorbell at her north Phoenix home late on Friday morning, October 24, 1997.

Two middle-aged men in business suits greeted her. One of the men, John Murphy, was Hypercom's human resources director.

Then 36, Smith was working for Hypercom, helping customers resolve complaints. Before that, however, she'd been the executive secretary to Jairo Gonzalez, then the firm's international president and a member of its board of directors. Gonzalez held Hypercom stock valued at about $8 million.

New at Hypercom, Murphy had known Smith for less than two weeks, but what a fortnight it had been. According to her account, Murphy had discussed the alleged attacks with her nine days before the two men came to her home. She says he told her he'd been assigned to investigate.

"He looked at me and he said, 'I know that he raped you,'" Smith told a psychologist in an interview on January 5, 1999. (Murphy denies saying this.)

"'I know about rape crisis and I know about the hospital. Do you want to tell me anything about it?' And I said nothing. . . . I couldn't imagine how [he knew]. I didn't know whether I wanted to admit it. I didn't know whether I could trust him. I didn't know whether he was a godsend. I didn't know if he was the devil.

"This is a powerful company . . . and I'm a little pea in this whole world, and I just thought, 'Oh, my God!'"

She says Murphy told her to stay away from Hypercom until he finished his investigation.

Jairo Gonzalez also was in his mid-30s. A short, compactly built man, he was known inside Hypercom as hard-driving, mercurial and arrogant. But he was making the company vast sums of money. (In fiscal 1997, which ended that June 30, Hypercom reported a $15.6 million profit on sales of $196.7 million -- about half of it through the international division.)

Though Gonzalez and his attorney, Rodney Johnson, declined to answer questions for this story, Gonzalez denies all wrongdoing, claiming in court documents that Smith has caused him "embarrassment, frustration, humiliation and emotional distress."

Joining Murphy at Colleen Smith's doorstep that morning was George Wallner, who founded Hypercom with his brother, Paul.

George Wallner, Hypercom's majority stockholder and chairman of the board, is a physically fit man in his late 40s who cuts an impressive figure. His exotic accent is a mix of his native Hungary and his first adopted country, Australia.

The Wallner brothers are the only two Arizonans who made Forbes magazine's 1998 list of high-tech's 100 wealthiest people. George is worth more than $100 million, Forbes reported; his brother has somewhat less.

George Wallner had a lot on his mind as human resources director Murphy excused himself and returned to his car to await his boss. It was a crucial juncture in the 20-year history of the company, which had started in Australia on a shoestring in the late 1970s and had grown into a dynamo.

Just three days hence, on Monday, October 27, 1997, Wallner and company planned to promote Hypercom's upcoming initial public offering of stock at a meeting of prospective Phoenix investors. The Wallners were to retain majority control of the company, but hoped to sell more than $100 million in stock. If things went as planned, the IPO would be one of the nation's largest that year.

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