Longform

Hypercom Confidential

Page 7 of 9

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."

Colleen Smith was afforded no such advice. She says she believed the confidentiality agreement encompassed even her own divorce attorney, James Leather -- who confirmed at the recent hearing that Smith hadn't told him about it.

(Murphy had become so involved in Smith's life that, on November 12, 1997, he went with her to Leather's office. "He was so attentive," Leather testified, "I thought that maybe he was her boyfriend -- or a friend at work. As I recall, they sat very close to each other. He was doing almost all the talking, very interested in all the [divorce] proceedings.")

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Paul Rubin
Contact: Paul Rubin