Longform

COOKING THE BOOK

Page 2 of 5

In February 1993, months after Kathy Smith and Kim Seagraves had been fired, another U S West salesperson was given a special assignment. Susan Chen, a top salesperson with a master's degree in business from Georgetown University, was asked to track several years worth of Yellow Pages advertising by insurance companies.

The idea, Chen says, was to be able to show insurance firms that not only should they place ads in the Yellow Pages, but the bigger the ad, the better.

As she went through several years worth of phone books, Chen says, she began noticing some peculiar things.

One cardinal rule of Yellow Pages sales, according to company policy, involves the order in which advertisements appear in the book. That order is determined strictly by seniority.

The rules are designed so that, for example, a brand-new auto-repair shop cannot buy its way to the front of the listings, ahead of advertisers who have been in the book for years.

But Chen says it appeared to her that some advertisers in the insurance section were being allowed to jump ahead of people in front of them.

"I started to find ads that had jumped into positions they weren't entitled to," Chen says. "There seemed to be a pattern."

Then, Chen says, she started to notice oddities in the way phone numbers were showing up in the advertisements. Some of the phone numbers kept changing from year to year, while ad positions did not, she says.

Uncertain what she was seeing, Chen says, she started pulling up some of the ad accounts on the company's computer to see how they were being handled. (At that time, U S West ad salespeople were allowed regular access to company computers. Chen says she had been told by the company to research the advertising accounts. Since the federal investigation began, the company has placed limits on who is allowed to read the computer files.)

It was when she saw some of the computer records, Chen says, that she became deeply suspicious about what was going on.

Yellow Pages salespeople, company documents show, are paid vastly different commissions depending on whether an advertisement is brand-new or simply a renewal of the previous year's ad.

On simple renewals, the salesperson can be paid as little as a 30 percent commission, while on brand-new ads, the commissions can balloon up to about 70 percent.

Chen suspected that the salespeople handling the odd accounts were playing a shell game with phone numbers. Using that game, they appeared to be tricking the system by making old accounts look like "new money" and, therefore, inflating their commissions.

"I was saying, 'What is this? We're not allowed to do this stuff,'" Chen says. And there was another possible benefit to switching around phone numbers, the NLRB documents explain. Each salesperson's annual performance--and the possible bonus he or she might receive--is calculated based on how much more advertising he or she sells each year than the year before.

By juggling accounts from phone number to phone number, the NLRB documents contend, salespeople could artificially lower the number of dollars constituting their beginning-sales yardstick for the next year's book. That legerdemain would make it seem as if they had generated more "new money" in the new year than they actually had.

Because she wasn't sure if any chicanery was taking place, Chen says, she decided to turn her findings over to managers and let them determine if something was, indeed, amiss.

"I wanted to be the least confrontational as possible," she says. "In case I was wrong."

In addition to the insurance accounts, Chen says, she also stumbled upon other accounts that appeared questionable, including ads in sections of the book listing appliance repair, air-conditioning service, heating repairs and electrical repairs.

In some cases, Chen said, she found accounts in which the advertisers had not paid their bills and weren't supposed to be allowed back into the book, but they would show up again, anyway.

The accounts had one notable characteristic, Chen says. Virtually all of them were handled by IBEW officers, and most of them were handled by either Karen Ortega or Phil Wheeler.

For the next several months, Chen says, she engaged in a futile attempt to have someone--in the company or the union--check out her findings and determine if anything improper was going on.

With one exception, she says, she was met by a wall of resistance. Upper management did not want to listen to her, she says, and IBEW officials, up to and including the union's international president, made no apparent effort to check out what she was alleging.

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David Pasztor