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.

Why would George Wallner spend part of his Friday at the home of a low-level employee?

"I was very concerned about how she was feeling," Wallner testified at a hearing on October 27, 1999. ". . . I felt that, as chairman, I should see what the actual situation was personally. I said [to Smith], 'Look, there are some very serious allegations here. If they are true, I am willing to go all the way to make sure that whoever is guilty is dealt with accordingly.' [She] was to be out of the influence of Mr. Gonzalez, out of the work area controlled by Mr. Gonzalez, and [the company would ensure] the safety and future of her children. She also expressed a very strong desire not to have things stirred up -- she wanted the whole affair to be forgotten. . . . She further commented that she felt very afraid of Mr. Gonzalez and she wanted protection.

"She repeatedly said that her main concern was the future of her children. I sympathized with her. . . . I said right at the outset that there is no way we would consider giving you cash. She repeatedly said she wanted to stay with the company. She wanted to work in an area where nobody knew anything about the affair, about the relationship with Mr. Gonzalez."

credit-card-swiping machine
credit-card-swiping machine
Jairo Gonzalez was the president of Hypercom Corporation's international division until recently.
Jairo Gonzalez was the president of Hypercom Corporation's international division until recently.

Smith faced Wallner with trepidation. She knew he and Jairo Gonzalez were good friends as well as colleagues, and that they coown a 53-foot sailboat, The Atlantica.

Her recollection of the meeting is similar to Wallner's: "Our conversation was if I wanted to press charges against him. He told me that [Gonzalez] had a problem. He appreciated my loyalty, and that he would make sure that Jairo got the help that he needed, and that he would make sure that it won't reoccur. . . . This was not to go outside this house."

Smith then still went by her married name of Muzzarelli. She was enmeshed in a protracted divorce from her husband, John, from whom she'd been separated since August 1996. Her two sons were all she had, she told Wallner.

Hypercom's boss told Smith he'd pay for her sons' college educations when the time came. He assured her that John Murphy's investigation would get to the bottom of things.

The month after the meeting at Smith's home was momentous for all concerned. Hypercom went public on November 14, and soon sold out its shares -- worth $125.7 million. Less than a week later, Smith and Wallner inked an agreement that was supposed to stay confidential.

It promised that Hypercom would "take appropriate steps to see that any prior inappropriate conduct [by Jairo Gonzalez] not recur and that Ms. [Smith] be free of any retaliation for having participated in the company's investigation of this matter."

The company also promised to pay off Smith's mortgage -- $89,000 -- and her divorce attorney's fees of $7,000. It gave her a $2,500 bonus. It promised to transfer her out of the international unit and "into a new, appropriate position within the Company."

Most important to Smith, however, was the following clause:

"Pay the reasonable costs incurred in providing a college education for Ms. [Smith's] two children."

That sounded great to Smith. Both of her children suffer from attention deficit disorder, and are likely to need special tutoring if they want to make it to college.

In return, Smith promised not to tell anyone -- and that meant anyone -- about her agreement.

She says she stuck to her end of the bargain for almost a year. Then, in September 1998 -- after, she says, she became aware that others at Hypercom knew of her secret deal -- she did discuss it, first with an attorney, then with her family.

Finally, she went public with a lawsuit.

The lawsuit lists Hypercom, Jairo Gonzalez and John Murphy as defendants. Her complaint and Hypercom's countersuit are being heard by Superior Court Judge Edward Burke.

Hypercom's attorneys have asked the judge to enforce the contract between the firm and Smith.

"It's as simple as a deal is a deal," Snell & Wilmer's Bill Hayden wrote in legal papers earlier this year.

And if a deal is a deal, the company's argument goes, and Colleen Smith broke it by talking, then she should have to return its proceeds -- including the mortgage payment and the attorney's fees. It would also mean Hypercom won't have to pay for the education of Smith's sons.

If the judge rules against Hypercom and sets a trial date, new details of an already remarkable and sordid case will emerge -- something the company surely doesn't want. Burke's decision is imminent.

The facts in the public record provide a rare, fascinating and often distasteful look inside one of Phoenix's largest companies.

Colleen Smith's novel case encompasses complex legal issues, human emotions and nagging questions. Among the questions:

Why didn't Smith report the alleged rapes to the police?

She says she drove to Thunderbird Samaritan Hospital in late September 1996, after the first incident, though the hospital has yet to produce records. She also says she spoke to a rape crisis hot-line counselor several times -- sources confirm this -- but balked at calling police for fear she'd lose her job, or that Gonzalez would harm her.

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