Author: John Branston

Of all the corporations in Memphis, AutoZone would seem to be one of the least likely to be hit with a major discrimination lawsuit. But that’s what happened last week when the Equal Opportunity Commission took the auto-parts retailer to federal court — something that happens in less than one percent of the thousands of charges filed each year with the EEOC in Memphis.

The allegations in the widely publicized 10-page complaint could still be settled before they go to trial, but the damage to AutoZone’s reputation has already been done. The complaint says AutoZone’s Memphis headquarters has a white-guy job network with a “pattern and practice” of discrimination against blacks and females.

That hits AutoZone where it lives. Minorities are the backbone of the $4 billion company’s customer base, and from the CEO to the rank-and-file, AutoZone’s rah-rah corporate culture of red shirts and acronyms like DIY for “do-it-yourselfer” is based on being customer-friendly.

The annual report is printed in Spanish as well as English, and minorities are prominently featured (portrayed by actors) in the company’s television commercials.

Company founder J.R. “Pitt” Hyde III is a staunch patron of the National Civil Rights Museum, and CEO John Adams Jr. was cochairman of the NAACP’s Freedom Fund Gala this year. In a move the company says is unrelated to the EEOC action, Adams, 52, announced last week he plans to resign later this year or early next year to spend more time with his family.

Image is at odds with reality, however, when it comes to some black and female AutoZoners, according to the EEOC complaint.

The lawsuit alleges that AutoZone has engaged in unlawful employment practices since 1993, with most of the specific complaints coming from 1993-1995:

* At least 59 official/manager positions were filled from 1993-1995 but none by blacks.

* Qualified blacks and women were passed over in favor of white males for jobs as technicians, service workers, security guards, project manager, construction manager, and technical writer.

* A word-of-mouth job network within AutoZone’s largely white male workforce deprived blacks and women of promotions and opportunities.

“Defendant employer at all relevant times acted with malice or reckless indifference to the federally protected rights of black applicants,” the lawsuit says.

AutoZone vice president of communications and training Lesley Hartney said the company follows state and federal laws regarding fairness and equal employment, but otherwise company officials have not commented since the lawsuit was filed last week.

Celia Liner, senior trial attorney for the EEOC in the Memphis district, said the office was still fielding calls this week from current or former AutoZoners inquiring about joining the class-action lawsuit which asks for back pay, relocation expenses, job search expenses, and compensation for emotional pain and suffering.

“A lot of them want to be heard,” she said.

She did not know exactly how many employees were involved in the earlier complaints that have already been investigated. But she said the long-time lag is not unusual. Only 30-60 of the more than 10,000 charges filed in the Memphis district, which includes Little Rock and Nashville, result in lawsuits.

After a charge is investigated, the EEOC issues a “determination of reasonable cause” if it has merit. Then there is a “period of conciliation” during which the EEOC tries to resolve the matter — sort of like a plea bargain in the criminal justice system, with the added advantage of no publicity. If that fails, the charges go to the EEOC office in Washington D.C., headed by chairwoman Ida Castro, which decides whether or not to file a complaint in federal court.

“It’s not unusual for larger cases to take quite a while,” Liner said.

The names of the people who made the charges will be revealed during the discovery process, Liner said.

“Nothing gets changed if somebody doesn’t take a step,” she said. “I think they’re very brave. They lay an awful lot on the line.”

The lawsuit was filed at 4 p.m. on a Friday afternoon and news crews were outside the company’s Front Street headquarters an hour later. Privately, some AutoZone officials suspected the EEOC of tipping the media, but Liner “categorically” denied that.

(You can write John Branston at branston@memphismagazine.com)

The city of Memphis has narrowed the field to three finalists for the job of outsourcing its computers and telecommunications.

The three companies (chosen from an initial field of 17 firms) are Affiliated Computer Services (ACS), headquartered in Dallas; Electronic Data Systems (EDS), also headquartered in Dallas; and Systems & Computer Technology (SCT), with headquarters in Malvern, Pa.

The contract for the rapidly growing computer and telephone operations could be worth as much as $70 million or more, based on the budget for the Division of Information Services, which is being outsourced. It will be for at least five and possibly seven years, according to Roland McElrath, director of the Division of Finance and Administration.

“We are still going through our evaluation,” said McElrath. “We have completed a technical review and we are going through a business evaluation of the proposals. We planned to go through oral presentations next week, and the target date to sign an agreement is early December. We are on schedule to hit that.”

The outsourcing effects only about 45 employees, but in dollar terms it is by far the largest in city history. McElrath declined to put a number on it because the bids will be negotiated, but the Division of Information Services was budgeted for about $10 million a year.

“Our strategy is to downselect to two companies and negotiate prices with them,” said McElrath.

Information systems includes computers and telephones for all city departments except the Memphis Police Department, which is on the Shelby County phone system.

Adding an unusual twist to the story are embarrassing financial disclosures, a dizzying sequence of management resignations, and allegations of fraud at SCB Computer Technology, the city’s consulting partner.

SCB Computer Technology, a Germantown company, has a $468,000 contract to help choose the outsourcing firm but is excluded from bidding on the job itself. Since the contract was signed in 1998, however, SCB has been in turmoil. It has paid the federal government $1.6 million to settle an overbilling complaint by the Tennessee Valley Authority. Its top management, independent auditor, and a board member have resigned. Its stock has been delisted by the Nasdaq Stock Exchange. And its credibility has been battered by company admissions of overstating earnings and hyping press releases in order to inflate revenues. Several lawsuits have been filed alleging that shareholders were defrauded.

“We are aware of the financial difficulty they have had but those have not had any adverse impact on the services they provided to us,” said McElrath. “The services we contracted for with them will be completed by the end of the year.”

The city has also hired the Washington D.C. law firm Shaw Pittman to advise it on legalities of the outsourcing.

SCB Computer Technology, founded by T. Scott Cobb and Ben Bryant Jr., became a publicly traded company in 1996. The stock traded for as high as $13 a share but had fallen to just over $2 a share when the company announced possible accounting problems in April. The Nasdaq delisted the stock, meaning trading was halted. SCB appealed the delisting but it was affirmed in August.

In July, SCB admitted overstating its earnings from 1998-2000 by $4.18 million and exaggerating the impact of four contracts on future earnings. The contracts, which did not include Memphis, were either canceled, under review, or worth less than SCB stated they were.

Cobb resigned as chairman last November along with board member Joe McLeary. Bryant replaced Cobb as chairman, then Bryant also resigned as chairman and CEO in May of this year and Cobb returned as CEO. Former chief financial officer and president Gary McCarter resigned in July. And Bryant resigned as a director and employee of the company in September, according to the company proxy statement released last week. The new chairman of the board is Jack Blair, formerly an executive with Smith & Nephew in Memphis.

The city has put together an evaluation committee that includes McElrath, CAO Rick Masson, City Councilman Tom Marshall, Abe Kani of the former Information Systems division, internal auditor Elizabeth Moore, and Deputy Human Resources Director Charmaine Claxton. The committee will make a recommendation to Mayor Willie Herenton.

(You can write John Branston at branston@memphismagazine.com).