HP faces fall-out from leak probe

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Hewlett-Packard (HP) last month announced the departure of chairman Pattie Dunn in the wake of an ‘illegal’ probe into boardroom leaks.

 

Industry analysts say Ms Dunn, who was once ranked 17th on Forbes magazine’s ‘100 Most Powerful Women’ list, has paid the price for a misjudged decision to embark on a legally dubious inquiry to unearth the source of a series of media reports and articles.

 

The California-based company announced that Dunn will be replaced in her post by current CEO Mark Hurd, who will take over as the company’s chairman at the beginning of next year.

 

Following news of his appointment, Hurd moved swiftly to distance his future governance from the snooping scandal by issuing a statement denouncing the controversial, and possibly illegitimate, investigation into boardroom leaks.

 

In the statement, Hurd said: "I am taking action to ensure that inappropriate investigative techniques will not be employed again. They have no place in HP. The company will work to put these matters behind us, so that we fully resume our focus on the business and continue to earn the trust and support of our customers, employees and stockholders."

 

Ms Dunn, who was named non-executive chairman of HP in February 2005, failed to retain a place on the revamped board.

 

In a round of interviews, she said she was "appalled" to discover that investigators hired by HP had posed as board members to obtain their personal information and claimed she had never heard of the practice, known as pretexting, until the scandal threatened to erupt in August.

 

She told one reporter: "I had never heard the word before that, I found out shortly after that that pretexting could involve a form of fraud."

 

The company released a transcript last month of a video address by its CEO and chairman-elect, Mark Hurd, to employees. In it, predecessor Dunn apologised for the course the investigation had taken and admitted that it had targeted two employees, as well as board members and other individuals outside the company.

 

"As reported, doubt has been raised as to whether the investigative techniques were appropriate," she stated. "These techniques were practised on a number of individuals including certain directors, two employees and a number of individuals outside the company, including journalists. I extend my sincere apologies to those individuals who have been affected."

 

Her comments were made amid increased legal scrutiny of the affair, which quickly developed into the threat of a court prosecution.

 

In mid-September, the US attorney’s office in San Francisco said it was examining the investigators’ dubious tactics. In addition, the House Committee on Energy and Commerce demanded that HP identify the consulting firm that headed the investigation as well as the subcontractor that allegedly used subterfuge to access the personal phone records of board members and journalists.

 

"The committee is troubled by this information, particularly given that it involves HP, one of America’s corporate icons, using pretexting and data brokers to procure the personal telephone records of the members of its board of directors and of other individuals without their knowledge or consent," the committee said in a written statement.

 

With a number of ongoing inquiries it appears likely the spotlight will continue to focus on the company’s activities during the inquiry and the actions of HP General Counsel, Ann Baskins, whose office oversaw the internal probe.

 

California Attorney General Bill Lockyer said he had gathered enough evidence to indict people for apparent breaches of the law committed during the ill-fated press-leak probe.

 

"[We have] sufficient evidence to bring criminal charges against individuals inside Hewlett-Packard as well as outside the company," Lockyer said.

 

"People’s identities were taken falsely, and it’s a crime. People accessed computer records that have personal information. That’s a crime."

 

The protracted inquiry into the investigation has been largely ignored by Wall Street investors as the company’s share price reached a five-year high during the summer fall-out.

 

But questions still remain about who knew within the company that personal phone records were being scrutinised, and whether the company supported the surveillance of its directors by providing investigators with private information.

 

The director at the centre of the original probe, George ‘Jay’ Keyworth II, who has subsequently acknowledged sharing company information with reporters, said: "The invasion of my privacy and that of others was ill-conceived and inconsistent with HP’s values."

 

The board had asked Keyworth to leave in May, but he refused.