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.

None of the management handbooks perused by New Times bother to warn human resources professionals not to get emotionally involved with the subjects of an investigation. That's considered a given.

Whatever had happened to Colleen Smith, she hadn't asked for this investigation and was in a vulnerable spot.

Murphy began to call her day and night, and showed up often at her house. One night, he took Smith and her sons to a Phoenix Coyotes game, sitting in Hypercom's excellent seats and buying the boys team memorabilia on the company's dime.

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.

One late evening, Smith got home after eating out with a girlfriend and found several phone messages from Murphy.

"It was, 'Where are you? Are you okay?'" she recalls. "I was in a funk and I told him so. My kids were at their dad's. He asked if he could come over, and I said okay."

Murphy recalled the evening this way in a deposition:

"She was talking about perhaps taking her life and she was very upset. . . . And I was concerned that she would do something rash, as upset as she was over the telephone. . . . She didn't know she would be able to get through this, was very upset, kept crying. I thought the most prudent thing immediately was to get there and see if I could either help her or get her to go somewhere."

Murphy left after a few hours, as Smith -- who still was on paid leave from Hypercom -- tried to regroup.

One part of her was suspicious of Murphy.

"All this time I have worked for this company and no one has ever acknowledged anything that I've ever done," she says. "Now, all of a sudden, I am princess of the ball or something here. . . . He's being a little handsy, patting me on the back with that, 'Not to worry, sunshine,' you know, playing with my hair kind of thing."

But another part of her wanted to believe in him, despite growing signs that he had romantic designs. Smith says Murphy asked her to go to the movies, or to grill some steaks at his apartment, but she declined.

Eventually, she told him that Jairo Gonzalez had raped her.

"Did you believe her, sir, while she was telling you this?" Smith's co-counsel, Jerry Busby, asked Murphy during his deposition.

"At that moment, yes, I did," Murphy replied.

"Do you still believe her?"

"No."

Murphy said he had ended his investigation after "I had done as much as I could to find out what had really happened between these two individuals. . . . I concluded that there had been an affair, and that these people had been lovers. . . . And the reason I believe that is because all through the investigation, she told me she did not want anything to happen to Jairo."

Not surprisingly, George Wallner agreed with Murphy's conclusions. He testified last month that he'd called Gonzalez shortly after he'd met with Smith at her home on October 24.

"I wanted to hear his side of the story," Wallner told Judge Burke. "I had strongly reprimanded him for getting involved in the first place. I reprimanded him for the style which he was generally dealing with his employees. I had forbade him any future contact with Mrs. [Smith] and . . . I instructed him not to come to Phoenix for the next three months. I felt there was a relationship between the two of them that was not really beneficial for the business. I knew that Mrs. [Smith] had an affair with Mr. Gonzalez -- a private affair."

Despite this, Murphy broached the idea of a settlement with Smith a few days before he and Wallner went to her home.

She steadfastly insisted on two key items -- that Hypercom pay for her sons' college educations (and, she says she believed, tutoring to help the boys get into college), and assurances that company officials would rein in Gonzalez.

As Thanksgiving 1997 approached, Murphy pressed Smith to agree to the settlement. He told her that Hypercom had agreed to send her and her children to her hometown for the holiday, not an inexpensive venture, and he threw in a free rental car.

Colleen Smith signed the document November 20, 1997 -- a few days after Hypercom's long-awaited IPO sale started. Wallner signed it the next day.

If Hypercom officials had been so convinced that Smith hadn't been raped, why did the company agree to pay off Smith's $89,000 mortgage?

"I felt the truth lied somewhere in between. . . ." George Wallner testified. "We bore of the responsibility."

The key part of the agreement from Hypercom's point of view was the confidentiality section: "If a court of competent jurisdiction determines that Ms. [Smith] has violated the covenant of confidentiality, the company will be relieved of any ongoing obligations. . . ."

Smith did not consult an attorney about her agreement before signing it. Hypercom used in-house counsel as well as the blue-blood firm of Snell & Wilmer to craft the paperwork.

A June 1, 1999, severance agreement between Hypercom and one of its top executives also included a confidentiality clause. It, however, added, "The company advises [the employee] to consult with an attorney prior to executing this agreement."

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