AN SEC QUERY FOR HP !

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Date: Tuesday June 14, 2005 11:01:00 am
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    An SEC Query for HP

    The agency asked HP for a chronology of new CEO Mark Hurd’s job
    negotiations and sales of NCR stock just before he left that company

    The Securities & Exchange Commission has asked
    Hewlett-Packard for information about the timing of stock trades made by Chief
    Executive Mark Hurd shortly before he was hired on March 29. BusinessWeek Online
    has learned that the SEC sent the computer maker a letter in April requesting
    information about the trades and the timing of its discussions with Hurd.
    HP provided the requested information, and the SEC has not made any
    additional requests, says a source familiar with the proceedings.

    ROUTINE MATTERS.  The SEC inquiry relates to Hurd’s sale of
    NCR while he was still CEO of that company, according to two sources with
    knowledge of the matter. If Hurd knew he was a candidate for the top job at HP
    at the time of the sales, the trades could constitute insider trading on his
    part.

    It is unclear if there is an ongoing probe by the SEC. Since the
    SEC declined to comment, it is not known whether the agency is still looking
    into the case, or whether it has closed its inquiry. The SEC routinely sends out
    thousands of inquiries each year, but investigates only a fraction of them.
    Companies that receive such inquiries from the SEC are often stuck in limbo, as
    the SEC almost never notifies companies if it has closed the books on a probe.

    According to public records, between Mar. 1 and Mar. 3, Hurd sold
    approximately 36,000 NCR shares at around $39 per share, earning $1.4 million.
    At the time, NCR’s stock was near an all-time high.

    “NO QUESTION WHATSOEVER.”  NCR stock fell 17% on the day HP
    announced Hurd’s appointment. That followed a 3% drop the previous day when
    BusinessWeek Online reported that his selection might be imminent. Hurd was
    hired by HP to replace former CEO Carly Fiorina, who was fired on Feb. 7.

    HP spokesman Robert Sherbin says that Hurd did not learn he was a
    candidate for the HP job until shortly after his final NCR stock sale was
    processed on Mar. 3. “The shares were sold before any discussion occurred with
    HP, and there’s no question whatsoever about the propriety of the transactions,”
    says Sherbin.

    HP has provided the SEC with information on Hurd’s trades,
    along with a timeline of events that confirms his discussions with the company
    took place after the trades, according to one source at HP with knowledge of the
    SEC inquiry. Hurd decided to sell stock roughly a week before the last trades on
    Mar. 3, but it took until that day for NCR to clear the sale by its then-CEO,
    the source says.

    QUICK TO ACTION.  It’s not
    known whether Hurd, NCR, or Russell Reynolds Associates, the executive search
    firm HP hired to find a new CEO, also received inquiries from the SEC. Hurd,
    through an HP spokesman, declined comment. NCR and Russell Reynolds also
    declined to comment. NCR has said in earlier statements that it followed proper
    procedures, and that there was nothing improper about the trades.

    HP
    received the request for information soon after The Wall Street Journal
    published an article on Apr. 6 regarding Hurd’s stock sales. “The SEC is moving
    rather quickly these days to get a handle on newsworthy events, so that scandals
    don’t get out ahead of them,” says Georgetown University law professor Donald
    Langevoort. “It’s premature to think there’s smoke, much less fire.”

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