Hypercom Confidential

Page 6 of 9

A native of New York City, Murphy is a tall, friendly man who wears a sincere expression that befits his job. He took the job as Hypercom's vice president of human resources in August 1997, and moved to Phoenix from the East Coast after going through his own divorce.

His first major task at Hypercom was daunting: Then-company president Al Irato assigned him to look into allegations against the powerful Jairo Gonzalez, and to start with Colleen Smith.

The investigation seemed to have been sparked by a presentation on the upcoming IPO that Hypercom's corporate counsel, Peter Stutsman, had given a few weeks before. Stutsman told the gathering that the company planned to improve the workplace.

One of those attending was Ruth Rodriguez, who in 1997 was Hypercom's international marketing manager. Rodriguez testified at the recent hearing that she'd asked Stutsman if workplace reforms would include upper-level executives. That led to a discussion of Jairo Gonzalez. Gonzalez hadn't physically molested Rodriguez, but she told Stutsman of his vile temper and unreasonable demands.

Rodriguez also said she knew of several alleged "inappropriate" incidents involving Gonzalez and female employees, including Colleen Smith. (She didn't testify about how she came upon such information.)

Rodriguez recalled that the phrase "class-action lawsuit" came up during her conversation with Stutsman.

This was not good news for Hypercom. The last thing the company needed in the critical days before the IPO was bad publicity, or a lawsuit. Maybe, as George Wallner suggests, it wouldn't have had any effect on the IPO. But maybe it would have, and that was not a risk Hypercom was willing to take.

Stutsman delivered the information to the company's big shots. John Murphy spoke to Ruth Rodriguez.

His version of the conversation: "Ruth told me that she had heard rumors about Colleen and Jairo Jr., and that she thought somebody ought to look into those rumors and see if she had been fairly treated."

Rodriguez's version: "He kept saying that, because of the IPO, that we'd have to work on it, and it would have to be investigated. But nothing really was happening. He kept saying that it could get out."

And what had Murphy been worried about getting out? "The situation with Jairo."

Yet Rodriguez apparently never told Colleen Smith that she'd told company supervisors of her suspicions.

Colleen Smith says she felt paralyzed during her first lunch with John Murphy, on October 15, 1997, at Andy's Family Restaurant. She couldn't figure out how he knew she'd been raped.

Murphy told her to go home until further notice and not to tell anyone what was happening, that he'd take care of things.

A few days later, Smith says, Jairo Gonzalez called her from London at 3 a.m., Arizona time, and implored her not to say a word about their "relationship" to anyone.

She says, "And I told him on the phone, 'Relationship? What relationship?'"

Murphy began his investigation from a distinct disadvantage. He testified that George Wallner himself instructed him not to interview Jairo Gonzalez, the target.

That goes against a basic tenet of human resources investigation, as discussed in a special report published by HR Executive magazine.

"You will also need to interview the person being investigated to determine his or her side of the story," the author notes. ". . . In certain situations, it may be necessary to retain someone outside the company to conduct the investigation, to ensure the necessary objectivity to investigate a complaint against a high-level executive."

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.

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."

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Paul Rubin
Contact: Paul Rubin