HP INSIDERS TO FACE CRIMINAL CHARGES
HP INSIDERS TO FACE CRIMINAL CHARGES
2006-09-13 at 12:11:00 pm #16443
HP Insiders Likely to Face Criminal Charges
SAN JOSE, Calif. Sept. 06 – Hewlett-Packard reshuffled the leadership of its board of directors amid the scandal surrounding its investigation of internal leaks to the media, but the company’s troubles are far from over.
California’s attorney general warned for the first time Tuesday that company insiders are likely to face criminal charges.”We currently have sufficient evidence to indict people both within Hewlett-Packard as well as contractors on the outside,” Attorney General Bill Lockyer said.He made that statement late in the day on PBS’ “NewsHour with Jim Lehrer,” following HP’s early morning announcment that Chairwoman Patricia Dunn would step down in January and be replaced by Chief Executive Mark Hurd. Meanwhile, another director who acknowledged he was a source of leaks resigned from the board.It was another chaotic day in a scandal that has rocked Silicon Valley’s biggest and oldest technology company, led to investigations by state and federal authorities, and raised questions about one of the most powerful women in corporate America.Dunn has admitted authorizing the investigation and she defended the need to determine who was leaking boardroom secrets to the media. But she said she was appalled that private investigators hired by the company used Social Security numbers to impersonate HP directors and journalists, then persuaded phone companies to turn over detailed logs of their home phone calls.The ruse – known as “pretexting” – is commonly used by private investigators but is against the law, according to Lockyer.”Unfortunately, the investigation, which was conducted with third parties, included certain techniques,” Dunn said in a statement. “These went beyond what we understood them to be, and I apologize that they were employed.”The FBI, the U.S. Attorney for Northern California and the House Energy and Commerce Committee have requested information on HP’s investigation. The Securities and Exchange Commission and the Federal Communications Commission are also investigating.Dunn will remain on the board after giving up the top job on Jan. 18. She will be succeeded by Hurd, who is respected on Wall Street and untainted by the investigation at the Palo Alto-based computer and printer maker.
Dunn said that the probe’s methods “have no place in HP.”
The company’s stock continued a steady climb that began not long after HP revealed details about the investigation in a regulatory filing. Shares of Hewlett-Packard Co. rose 56 cents, or 1.54 percent, to close at $36.92 on the New York Stock Exchange. The stock hit a new 52-week high of $37.25 earlier in the session.Industry analysts say Hurd’s track record as CEO and straightforward style make him the logical pick to replace Dunn in as the company copes with the backlash from the breaches.”This is a very elegant solution to a tricky situation,” said technology industry analyst Cindy Shaw, a former HP employee.Dunn was angry about media leaks of confidential board discussions and commissioned an unnamed outside firm to identify their source. At a board meeting in May, Dunn identified director George Keyworth III as the source of a January article on CNET Networks Inc.’s News.com. The board asked Keyworth, 66, to resign, but he refused. HP then barred him from seeking re-election.On Tuesday, Keyworth resigned and acknowledged sharing company information with reporters, but said he did so with the company’s approval.”The invasion of my privacy and that of others was ill-conceived and inconsistent with HP’s values,” he said in a statement.The attempt to oust Keyworth last spring riled another board member, longtime Silicon Valley venture capitalist Tom Perkins, 74, who resigned and left the May 18 meeting.HP’s focus should now be on moving forward with Hurd at the helm, Perkins said, but he won’t return to the board if invited.”I believe in HP. I believe in Mark Hurd,” he said. “This too shall pass.”The pressure on Dunn to step down increased when Congress and federal investigators joined the probe.Some analysts said Dunn should have been removed altogether, but Roger Kay, who follows HP as president of the market research firm Endpoint Technologies Associates, had a different take.”I think the fact that they made the statement that she’s going to leave solves most of the problem,” he said. “I don’t think it’s that material precisely when she leaves.”