Most Valuable Pervert

Some industries are prone to wrongdoing, criminal and otherwise. The chemical, tobacco, pharmaceutical and auto industries come to mind. The telephone industry is not usually a regular in the criminogenic crowd. That’s why NYNEX, the regional telephone company serving New York and the New England states, stands out.

In May 1990, a federal grand jury in Washington, D.C. indicted NYNEX on one count of criminal contempt for violating the consent decree that broke up the giant Bell operating system. The U.S. Justice Department began its investigation after Scott Rafferty, a lawyer hired for NYNEX’s Telco subsidiary, questioned the legality of giving MCI Communications access to Telco computer facilities. Rafferty says he was fired for questioning the “regulatory exposure” of a number of NYNEX’s business operations.

In October 1990, the Federal Communications Commission (FCC) reached an agreement with the company settling FCC charges brought in February that the company overcharged its unregulated affiliates by $35.5 million. The company was fined $1.4 million. The settlement decree, approved by a vote of 5-0, did not cite findings of wrongdoing. But Commissioner Andrew C. Barrett said in a separate opinion that he would have preferred to have had such a finding. Barrett said there was “sufficient evidence of wrongdoing to find that NYNEX violated the FCC’s rules regarding transactions between telephone companies and their nonregulated affiliates.”

Rafferty calls the FCC settlement with NYNEX a sellout.

The New York Public Service Commission apparently didn’t think very highly of NYNEX’s veracity or competence either. It reduced the company’s $945 million rate request to $23 million.

Company executives were apparently paying more attention to the libidinous needs of fellow male executives than they were to the rights of the company’s phone customers. From 1984 to 1988, NYNEX allegedly held “pervert conventions” in Florida, where employees and suppliers partied together. Awards were given at the convention: one NYNEX employee won the “Procurement Award” for three consecutive years for “arranging for women” to appear at the conventions; others included the “Most Valuable Pervert Award” and the “Moon Over Miami Award.”

Rafferty charges that there were improper relationships with suppliers at the conventions that tainted business transactions. New York State officials allege that many suppliers who attended the conventions saw their business from NYNEX increase, but NYNEX denies this.

Instead of listening to Rafferty and other employees who sought an early exposure and resolution of incipient corruption within the company, NYNEX sought to silence the messengers. According to Rafferty, a number of other whistleblowers within the company faced this silencing treatment. Michael Burkhart was discharged by a NYNEX subsidiary after he questioned the use of illegal, one-of-a-kind contracts to give unlawful discounts to certain large corporate customers. Robert Zirkelbach was fired by a NYNEX subsidiary after he questioned markups as high as 1,004 percent that the NYNEX procurement subsidiary, MECO, was charging. Tobias Squitieri was fired after he complied with a New York state employment discrimination administration subpoena regarding the discharge of another employee.

Many of the fired employees have brought legal actions against NYNEX.