By JOE STEPHENS - Staff Writer
Date: 04/05/98 23:30

A court reporter, hired to transcribe statements from witnesses, told lawyers in a 1994 lawsuit that she felt compelled to make a disclosure:

Her husband worked for the company at the center of the dispute, the Sprint Corp.

The announcement sent attorneys scrambling to hire a new court reporter.

The lawyers had no idea that the judge presiding over the $1.9 million lawsuit against a Sprint subsidiary had her own ties to the company. U.S. District Judge Kathryn H. Vratil owned stock in Sprint.

Vratil issued an order in the case on Jan. 5, 1995, setting filing deadlines and a trial date. The very next day, records show, she invested up to $15,000 in Sprint.

Six months later, Vratil bought another block of Sprint stock worth up to $15,000.

Unlike the court reporter, however, the judge did not reveal her ties to Sprint. They remained unknown throughout the jury trial -- and for another two years.

Dana DeSuza, the former Sprint worker who filed the lawsuit in Kansas City, Kan., lost that trial. Along the way, Vratil granted Sprint's request that she throw out part of the claim. Today, DeSuza is bitter.

"I hate everybody who had anything to do with this case," she said.

Vratil said she discovered the problem herself in spring 1997, more than a year after the trial. A short time later, after The Kansas City Star began reviewing Vratil's finances, the judge sent DeSuza an extraordinary invitation: Vratil said she would consider throwing out the judgment and reopening the case.

But DeSuza said the first trial emptied her savings and that she could not afford to head to court yet again. And she wants nothing more to do with the legal system.

"I should be fighting back," she acknowledged, "but after two years of fighting, I was so disgusted. I'm disgusted with all of it."

Vratil declined to respond to DeSuza's criticisms but took responsibility for not revealing her stock earlier. She acknowledged that the investment may have created the appearance of impropriety. And she said in a letter that it resulted in an "actual or apparent" conflict of interest.

"I'm not proud of this," the judge said in an interview. "It's a bad situation."

Vratil said she mistakenly thought her staff was monitoring stock trades made by her investment manager and was scouring her caseload for conflicts. Her broker had discretionary authority to buy stocks in a "managed money" program, the judge added, so she considered the ownership largely technical.

"I don't know that I'm right," she acknowledged. "You will have to make your own judgment."

Lawyers for Sprint would not comment.

`Something wasn't right'

DeSuza's four-year legal odyssey shows how a judge's stock ownership can shake litigants' faith in the courts.

The journey began when she lost her job in telephone sales for a subsidiary of Sprint. The company said she missed work too often.

But DeSuza, who is white, thought Sprint was discriminating against her because of her race and because she had a disability. At the time, she said, her doctor had just diagnosed her as suffering from hypoglycemia, or low blood sugar.

The Independence woman was 23, unemployed and the single mother of a 2-year-old daughter. Over the next two years she poured an estimated $6,000, much of it borrowed, into a lawsuit against the subsidiary.

The dispute climaxed in a four-day trial in which DeSuza and her lawyer said Vratil made rulings that damaged DeSuza's case.

Then, just before the jury began deliberating, Vratil ruled that DeSuza had failed to prove the company discriminated against her because she was disabled. Vratil personally decided that claim in favor of the company.

The jury decided the remaining race discrimination issues, returning a verdict against DeSuza.

"The whole thing was awful," DeSuza recalled. "I had $5,000 in my savings and it was all gone after the trial."

That was June 1995. Two years later, The Star requested copies of Vratil's financial disclosure reports.

The Star's request triggered written notice to Vratil that her finances were under review by the newspaper.

Two weeks later, Vratil mailed notices to DeSuza and litigants in at least five other lawsuits. The judge said she was writing "with embarrassment" to reveal for the first time that she owned stock in Sprint and other corporations.

"I understand," Vratil wrote, "that the parties may be entitled to have the judgment in this case vacated."

Vratil said in an interview that the timing had nothing to do with The Star. In each case, she said, the recipients ignored her offer or told her they considered her rulings fair.

DeSuza's lawyer explained in a letter to DeSuza that Vratil "presided over your trial against Sprint when she should have recused herself. The net effect of this is that Judge Vratil will likely grant you a new trial, and then assign the case to another judge for hearing."

There was no evidence the investment influenced Vratil's rulings. Still, the revelation shook DeSuza and left her lashing out at the judge and the legal system.

"I knew something wasn't right," she said. "I've been suspicious all along. Now, everything makes sense to me."

David Barrett, her lawyer, is more forgiving. He complimented Vratil's judicial ability and said he was sure the stock did not slant her decisions. Yet Barrett said the wider findings of The Star's investigation left him wondering.

"I wouldn't want a judge to own stock in a company I was suing," Barrett said. "You would think they would be more careful."

`Dear Shareholder'

The judge's disclosure in that case had its genesis in a similar but unrelated lawsuit against the same company. That case shows how even temporary conflicts of interest can hurt.

Nancy Powell sued Sprint and two of its subsidiaries in August 1996, claiming the companies denied her promotions and eventually did away with her job because she was a woman.

Eight months of legal wrangling later, Powell was less than two weeks from trial. Vratil was signing her final pretrial order. Only then, the judge said, did she notice a letter on her desk from Sprint. It began, "Dear Shareholder."

Vratil already had signed a disclosure form listing two separate investments in Sprint. Still, Vratil said that seeing the letter was the first time she reached "actual knowledge" that she owned the stock. She called Powell's lawyer and broke the news.

Vratil immediately withdrew. That set back the entire lawsuit.

"Eleven days before the trial, this all comes to a stop," Powell said. "We were going to turn back the clock and start over."

Powell said her lawyers were unwilling to begin again. They urged her to settle out of court for less money than planned, she said, or to find new attorneys.

Powell, who by then was living in California, said she had no choice. She ended the lawsuit but remains angry.

"I could not put in economic terms what this has actually cost me," she said. "I paid a huge price."

Bob Bailey, one of her lawyers, agreed with Powell's account but added that other factors contributed to dropping the lawsuit. An attorney for Sprint would not comment.

Powell called it ironic that the courts provide no way to punish the judge for her lapse.

Just six weeks before Vratil's disclosure derailed the case, Powell said, the judge took Powell and her lawyers to task for not promptly producing documents sought by Sprint. Vratil ruled that Powell had failed to "timely comply" with a schedule she set for the case and, as a penalty, ordered her to pay almost $2,800 to Sprint.

But when Vratil's revelation set back eight months of litigation, Powell said, there was no penalty at all.

"Where is the fairness here?" Powell asked. "She should not have immunity from her mistakes. It's not right."

Vratil would not respond to Powell's complaints.

Powell said she wanted to file a formal misconduct complaint against the judge but her lawyers talked her out of it. By breaking her silence today, she said, she hopes to spark reform.

"The system failed me," she said. "So what do we do about fixing the system so it doesn't fail anybody else?"