A judge has sided with the Phoenix-based Hypercom Corporation against an ex-employee who claimed the company bought her silence after a top executive raped her. Superior Court Judge Edward Burke issued his 17-page ruling November 22 after a two-day hearing in the case.

New Times published a story on the case ("Hypercom Confidential," November 18), which told of Colleen Ryan Smith's rape allegations against Jairo Gonzalez -- the onetime president of Hypercom International and a company director -- and sexual harassment allegations against the firm's human resources chief, John Murphy.

Hypercom is the world's second-largest producer of machines retailers use to verify authenticity of credit and debit cards. It employs about 1,000 people, about 500 of whom work in the Valley.

The story described how Smith -- then a Hypercom employee in her 30s -- had signed a contract with her employer in late 1997 to keep mum about the alleged assaults. Evidence at the hearing revealed that Hypercom had struck deals with other female employees who had accused Jairo Gonzalez of sexual improprieties.

Gonzalez has denied any wrongdoing, and hasn't been charged criminally. He currently serves as Hypercom's managing director of global sales and marketing.

In return for her signature on the agreement, Hypercom had paid off Smith's home mortgage, promised to put her two sons through college, and pledged other financial benefits.

Several months later, however, Smith claims she overheard two fellow employees discussing her supposedly secret "deal." In late 1998, she sued Hypercom for violating the confidentiality agreement and other alleged wrongdoing, saying she had signed the contract under duress. (Her attorney offered several other legal theories as well.)

Hypercom countersued, claiming Smith had violated the agreement's crucial secrecy component and, at any rate, the contract had been binding.

Concluded Judge Burke, "Reasonable people could not agree that there is clear and convincing evidence that the agreement was entered into as a result of duress, fraud or mistake. . . . [Smith] did not produce sufficient evidence to allow this case to be submitted to a jury. . . ."

Though he sided legally with Hypercom, Burke took pains in his opinion to blast the company and defendants Gonzalez and Murphy.

"As abhorrent as Gonzalez's assaults on [Smith] and Hypercom's retention of Gonzalez as an officer and director were," the judge wrote in part, "they are not the issues the Court was called upon to decide, and the Court is bound to follow the law. The court finds as a matter of law that the agreement was entered into knowingly and voluntarily, was ratified, is enforceable and bars most of the claims in [Smith's] complaint."

Burke wrote that John Murphy's "conduct toward Ryan was totally inappropriate for a senior vice-president of human resources assigned to investigate allegations of sexual harassment."

He also noted that he didn't "find [George] Wallner's testimony to be credible." Wallner, Hypercom's majority stockholder and chairman of the board, testified that he suspected Gonzalez and Smith (who had worked as Gonzalez's executive assistant) had engaged in a consensual sexual affair that had soured.

The judge continued:

"Although the court finds that Ryan's conduct during the period Murphy was negotiating with her was consistent with that of a rape victim, and that she was in a vulnerable emotional and financial state, it does not find sufficient clear and convincing evidence to submit the issue of whether Ryan signed the agreement under legal duress placed upon her by a Hypercom employee to a jury. . . ."

Larry Debus, Smith's lead attorney, says he plans to appeal the ruling. If Judge Burke's ruling stands, Smith might be forced to repay the $89,000 Hypercom spent to pay off her mortgage as part of her confidentiality agreement -- and the company would not have to honor its promise to help educate her children.

Contact Paul Rubin at his online address: [email protected]

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Paul Rubin
Contact: Paul Rubin