Power Play

Stockholders are not usually a hostile crowd, especially when a company is posting record profits. At annual meetings, where the audience typically is made up of men in Brooks Brothers suits and women in pumps and pearls, the emphasis is on making money, not storming the barricades. Conservative investors complain about how boring these meetings are, and they often skip them.

Which made January's meeting of Public Service Company of Colorado shareholders all the more extraordinary. Well-heeled stock owners lined up at the microphone to attack company chairman Del Hock for the $20 million he and eight other top executives will share after PSC merges with Southwestern Public Service Co. of Amarillo, Texas, early next year. That merger, which has been touted as a win-win deal for consumers served by both companies, will create the 25th-largest utility in the United States, with $3 billion in annual revenues and almost 4 million customers spread over five states.

Hock defended the multimillion-dollar payouts, insisting the well-padded golden parachutes were needed to prevent his fellow executives from heading for the exits before the deal was done. Although Hock took home more than $717,000 in total compensation last year and PSC president Wayne Brunetti pocketed $481,000, Hock told the audience that the occupants of Public Service's executive suites needed further enticement to stay in their jobs during the merger, since those executives are "critical to the work that needs to be done."

But when several Public Service employees who also own shares criticized the utility's planned elimina-tion of 600 jobs after the merger, Hock suddenly waxed philosophical. "Change, as we have learned, is a difficult thing for all of us," he mused.

Of course, change can be less difficult for some. Hock has already announced he'll retire with his several-million-dollar bonus once the merger goes through. But while the executives running the company can parachute onto a golf course, the employees they leave behind would have no soft landing if they jumped the corporate flagship. Instead, many of them are suing their employer, for everything from sexual harassment to breach of contract. More than twenty lawsuits have been filed against the company by former or present employees in the last few years. Public Service has settled out of court in several of these cases, most recently in a sex-discrimination and harassment suit involving two southern Colorado women that included sensational allegations of peepholes in a women's locker room, industrial sabotage and crude sexual shenanigans.

In the Form 10-K document Public Service filed earlier this year with the Securities and Exchange Commission, the company assured investors that the employee lawsuits would have little impact on its "financial position or cash flow." With Public Service claiming that the merger with Southwestern will save the new company $770 million in costs over the next ten years, a few million paid out to distraught employees looks like chump change. It certainly hasn't fazed Wall Street, which has cheered the planned merger and boosted the utility's stock price. Even Colorado's public-utilities commissioners have given tentative approval to the deal.

Already reeling from one massive round of layoffs, PSC employees have braced themselves for more unpleasant jolts as the two regional power companies become one.

The employee lawsuits filed against Public Service come from all over the state, but there are certain patterns to the allegations contained in those suits. Many of them come from women working in power-plant jobs, and they make life at the utility sound like a descent into Dante's Inferno.

Last month Public Service settled out of court with Jane Gallegos and Marcia Oates, two women who worked for years at the Comanche power plant near Pueblo and sued the company for sex discrimination and sexual harassment in 1994. Terms of the settlement were not disclosed, and Gallegos and Oates's attorney said that as part of the agreement, they could not talk to the media. But affidavits filed in the case last April portray a work environment chillingly hostile to women.

Gallegos worked at Comanche for seventeen years, starting as an auxiliary tender and working with coal, fly ash, sulfuric acid and lime. She was one of the first women employed at the plant to do that type of work. "From the first day of my employment, I was treated like an outsider and separate from my fellow employees," Gallegos said in an affidavit. "I was continually set up for failure by co-workers and management. Not only did my male peers harass me, but the supervisors and managers did also. Supervisors have even sabotaged my equipment, turned valves off, opened valves, shut off pumps or motors, and messed with calibrations of chemicals."

She went on to relate a seventeen-year campaign of sexual intimidation from co-workers who resented her presence at the plant. "I was sexually molested; harassed; belittled; verbally, mentally and physically abused; bird-dogged; retaliated against, and given more than my share of low level jobs," Gallegos said. "There was, and still is, graffiti about women, and some was very descriptive and directly pointed to me. Some of the graffiti written was 'Jane gives good head'; 'Jane's a good fuck'; a picture of female genitals with my name on it, 'sweet lips Jane'; a picture of just breast and rump titled 'a perfect woman, Jane.'"

Things got even worse when she found peepholes in the women's locker room. "Management did not allow me to find out who the perpetrator was, as they did not want a 'scandal,'" Gallegos said. "There are still holes in the women's locker room ceiling that are stuffed with toilet paper. Management had done nothing to repair the problem; I put the paper there myself. When I left, there were a total of nine peepholes in the women's locker room."

Gallegos claimed she was denied promotions and transfers by supervisors who didn't like the fact that a woman was working in a traditionally male job. "Women in a nontraditional job are looked at as a 'whore' or 'tramp,' and supposedly the only reason I got and kept my job was because they said I was 'putting out,'" she stated in the affidavit. "One time two of my fellow men employees said they saw me at City Park the day before, 'screwing right on the grass.' Some of the supervisors let the men chastise and make gender jokes at my expense. They did not control and stop this behavior. In fact, some of the supervisors acted in the same manner."

Her work was singled out for criticism, Gallegos claimed, and she was chastised for mistakes in front of other employees. Because cleaning was regarded as "women's work," she said she was assigned to clean the men's locker room, and was interrupted on four different occasions by men who walked in stark naked.

"I was constantly retaliated against when I complained about sex discrimination," Gallegos stated. "After I went to management, my name was then advertised as being the troublemaker. I, like many of the other female employees, was afraid to make waves and jeopardize my job. From past experiences, I knew that 'troublemakers' would be forced out."

Gallegos suffered a nervous breakdown in February 1994. According to her affidavit, she has been diagnosed with severe major depression due to work-related stress; four other doctors have confirmed this diagnosis.

Marcia Oates, another worker at the Comanche plant, claimed she was continually harassed by her supervisor and several other employees. At one point, she said in an affidavit, she told her supervisor a co-worker who had threatened her was bringing guns into the warehouse. The supervisor responded, "I can understand why the postal workers would go in and shoot their fellow employees."

Oates said she attempted to get management to do something about the harassment, but to no avail. "I really tried to fix my problems with sex discrimination by going through company channels," she stated. "I filed several grievances with the union. However, filing grievances never fixed things. Instead, management and my co-workers retaliated against me for filing grievances and complaining about their discriminatory behavior. It was standard practice for people who complained to be retaliated against."

By the time the two women filed their suit, Public Service certainly had reason to know there might be a problem with sex discrimination at the Comanche plant. In 1991 the company had lost a sexual-harassment suit brought by a former plant maintenance worker, Victoria Hansel. Although the settlement was not disclosed, it was reportedly for several hundred thousand dollars.

In that case, U.S. District Judge Lewis Babcock found that Public Service had created a hostile work environment for women and that Hansel's co-workers "began a continuous and concerted campaign of sexual harassment and discrimination intended to force her out of plant operations, previously an all-male environment." Although the company claimed that "evolving sensibilities absolve it of liability," Babcock angrily dismissed that argument. "I have no doubt that the facts of this case would rattle the sensibilities of the ancestors in Darwin's family tree," the judge said in his decision.

Public Service acknowledges there have been problems with the behavior of some employees at the Comanche plant. "Comanche has been a trying place for us," says PSC spokesman Mark Stutz. "There are difficulties when you're trying to change corporate culture. Ninety-five percent of the employees at Comanche have heard the company's message that they need to change. We've been doing diversity training at Comanche since the early 1980s. When you get down to individual behavior, sometimes it's difficult to regulate."

Stutz says that Public Service, like many employers, has struggled over the past twenty years with the social changes that have brought women into previously all-male workplaces. The company has a "zero tolerance" policy for sexual harassment, he adds, and the company's employees are told, "It's one strike and you're out."

But allegations of unfair treatment have come from female Public Service employees at plants around the state, not just Comanche. In 1994 Public Service settled out of court for an undisclosed sum with Arlene Taskas, a 55-year-old Brighton woman who had worked for the company in a maintenance position and sued for sex discrimination and harassment. Taskas alleged she endured malicious pranks from male co-workers, claiming they'd filled her work gloves with grease, dumped buckets of water on her, put a dead pigeon in her lunch bucket, entered the women's restroom while she was using it, and smeared grease on the women's toilet seat.

And just last month the company was slapped with another sex-discrimination and harassment lawsuit from fourteen current or former female employees. All of the women have worked in traditionally male jobs at PSC facilities across Colorado. Their attorney, Lynn Feiger, is trying to get the lawsuit certified as a class action on behalf of all women working in nontraditional jobs at Public Service.

Feiger, who has represented many of the workers suing Public Service, including Gallegos and Oates, says the company hasn't come to terms with the sex discrimination and harassment at its facilities. "It would take some significant action and motivation to change that culture," she says. "I don't think they've taken effective steps to resolve the problem."

A man who worked at the Comanche plant for more than twenty years is also suing Public Service. In a case that will go to trial in October, former turbine and equipment operator Jim Lindsey alleges he was harassed by co-workers because of his sympathy for women at the plant. In his affidavit, Lindsey said that after he gave a deposition on Victoria Hansel's behalf, his co-workers asked him if he'd gotten any sex in return. Because he was one of the few male employees willing to talk to female co-workers, Lindsey said, he was regarded as a traitor by some of the other men at Comanche.

In his affidavit, Lindsey said he was singled out for talking to one woman in particular who was widely disliked. "The guys would say disgusting things to me about her such as, 'did I lick her pussy, do I eat her, do I stick my cock up her ass,'" Lindsey stated. "At one point I was so upset by their constant comments that I told [the woman] that I couldn't talk to her anymore. She pleaded with me and said 'Oh, please talk to me, nobody else does.'"

While most of Public Service's legal problems seem to revolve around discrimination issues, a 1994 jury decision awarding nearly $1 million to two laid-off employees may be even more troubling to the company. The two employees, Joseph Carbone of Arvada and Jeanette Richey of Denver, sued for breach of contract. They told the jury they had been promised lifetime jobs by Public Service and that the company had reneged. Their evidence included letters to mortgage companies signed by the Public Service employment director, saying he expected the employees would be with the company until retirement.

The ruling stunned Public Service--as well as other Colorado employers--and the company is now appealing. And when, in the summer of 1994, the utility announced it would eliminate 600 middle-level management positions, it said non-union employees who received a severance package would be paid extra for agreeing not to sue the utility later on. The company offered an extra two- to twelve weeks' salary to employees who signed a "severance enhancement" waiver releasing Public Service from "certain legal liabilities."

Not surprisingly, many of those who were laid off in that move remain bitter toward Public Service. "The company used to tell you you could have a job for life until you retire," says Mike McCoy, a former marketing manager who was laid off in 1994. "The company was disloyal to people after all their years of service."

Like many of those who were let go, McCoy, who is 55, believes Public Service chose to eliminate the jobs of older employees who had more seniority and made more money than their younger colleagues. "You ended up with a company where most of the employees are under forty," he says.

One of those older managers, Harold Rust, sued the company in May for age discrimination. Rust was 61 years old and had spent nearly forty years working for Public Service when he was laid off in 1994. The former district manager for east Boulder was told his position was being merged with another and he would have to compete for that job. According to Rust, the company gave the new position to a younger, less experienced colleague. "Public Service was my life," he says. "Now most of the employees my age are all gone."

Public Service denies that any age discrimination was involved in the layoffs. Stutz calls Rust's lawsuit "an unfortunate aspect of downsizing" and says many employers who go through large layoffs see a spate of lawsuits from workers who are let go. "We feel it's a natural outcome of any job reduction that you see these kinds of suits," he adds.

The company has eliminated 1,700 positions since 1994. Public Service now has about 4,800 employees, and hundreds more will lose their jobs after the merger goes through.

The downsizing is essential for the company to stay competitive, Stutz says. Many consumers may find it strange that Colorado's largest monopoly power company worries about competition, but Public Service is convinced that the days of guaranteed profits and captive customers are coming to an end.

Although the time when a typical homeowner can choose what company supplies him with electricity is still a long way off, companies like Public Service have reason to be concerned about losing their largest customers. A nationwide grid of power lines has made it increasingly easy to move power from one part of the country to another, and some industrial users have found ways to buy cheaper power from utilities hundreds of miles from home, a practice known as "retail wheeling." Many large companies and institutions are also producing their own power independent of Public Service, including Coors Brewing Company and the University of Colorado.

"Deregulation is coming for the utility industry," says Stutz. "We can't operate in the same manner we used to. We're going to go from a monopoly industry to one that is market-driven. We have to be the low-cost provider in our area. Downsizing was necessary for us to streamline our operations."

And the downsizing continues. Public Service employees, who are now bracing for the post-merger round of layoffs, resent the package deals for top PSC managers. "You're getting laid off with a minimal severance package, and they get beaucoup bucks," says one employee who asked not to be named. "Del Hock said nobody has a right to lifetime employment and then gives himself a multimillion-dollar bonus."

While employee anger at the bonuses wasn't unexpected, the vehement protests of Public Service shareholders, who will all get stock in the new company, took PSC execs by surprise. "The shareholders feel the golden parachutes are unneeded and outrageous," says Gerald Armstrong, a longtime Public Service stockholder. "Why do they need golden parachutes when they're automatically rehired for the new company? The shareholders have never had any benefit from golden parachutes."

Adding insult to injury, those who own stock in the company will be paying for the bonuses, since Public Service has already told Colorado regulators that it won't pass that cost on to ratepayers. Many shareholders say they feel helpless to stop the $20 million in executive bonus payments. "I think it's obscene," says Harry Methner, another Public Service stockholder. "There's no call for it. It's un-American to milk the company like this. I don't care if its Public Service or US West or Storage Tech; it's not needed for these people to draw this kind of dough."

According to Methner, most of Public Service's stock is owned by mutual funds that don't care about huge executive bonuses as long as the value of the stock is rising. As a result, he says, "there's very little you can do but grouse."

Public Service insists the payments are necessary to keep its executives from jumping ship during the merger. After the deal, while both Public Service and Southwestern will continue to operate under their current names, they'll be run by a new Denver-based parent company known as New Century Energies Inc. That means some of the current executives may see their jobs eliminated.

"We want to give some assurance to these executives that they'll be compensated if they stay," Stutz says. "You want to make sure you retain your top-level executives through a difficult time."

The $20 million compensation package for nine Public Service executives was approved by the company's board of directors. The fourteen-member board includes Public Service chairman Hock and president Brunetti. Others on the board are well-known in Denver business circles, including Tom Stephens, chairman of Manville Corporation; Barry Hirschfeld, president of A.B. Hirschfeld Press; and Will Nicholson, chairman of Rocky Mountain BankCard System Inc.

Members of the board receive $30,000 a year to attend monthly meetings; vacancies are filled through nominations by board members. Methner describes this closed system as a "CEO's union," and he and other critics complain that corporate board members often spend their time trying to feather each other's nests. "The board members are all CEOs of other companies," Methner says. "The board of directors will vote for anything. The fairness of America is suffering in the boardrooms of America's corporations."

Although Methner complains about the executives' package deal, there isn't much he and the other stockholders can do about it. In fact, at the January meeting stock-owners approved the merger. Public utility commissioners in both Texas and Colorado have already given the deal tentative approval; final approval is expected later this fall. And although the Colorado Public Utilities Commission has been holding hearings on the plan this summer, most of the complaints have come from environmentalists (see sidebar, page 15). Even consumer advocates, including the state Office of Consumer Counsel, endorsed the merger after Public Service promised to slash electric rates by $18 million per year--out of $1.4 billion in annual sales of electricity.

The two utilities are so confident the deal will go down that they've already carefully choreographed a round of musical chairs in the executive suite. While lower-level employees worry about the future, at the top it's already set. Hock will retire next spring, after the merger goes through, his multimillion-dollar parachute lashed firmly in place. Southwestern's current chairman and CEO, Bill Helton, will then step into the position of chairman of New Century Energies. He'll stay there until his own retirement on May 31, 2001, when he'll pocket whatever bonuses he has coming and move aside so that current Public Service president Wayne Brunetti can take the helm.

All this maneuvering has longtime stockholders shaking their heads. "Utilities are always above the call of the people," says Gerald Armstrong. "If I had the bucks, I'd drape a golden parachute off the Public Service building.

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Stuart Steers
Contact: Stuart Steers