HP CEO says he approved email ruse in leak probe

[stu]

By Duncan Martell

1 hour, 55 minutes ago

 

 

 

PALO ALTO, California (Reuters) - Hewlett-Packard Co. (NYSE:HPQ - news) Chief Executive Officer Mark Hurd said on Friday he had approved an e-mail ruse to track down media leaks, admitting for the first time his involvement in a deepening scandal.

 

But HP's board appointed Hurd chairman after asking Patricia Dunn to resign, saying her departure would remove a distraction and allow the company to move forward.

 

Analysts, however, were not convinced that these moves would necessarily be enough for HP to put an end to the controversy, since California's attorney general continues to investigate the company for possible criminal charges.

 

"It's tough to say that (Hurd) is definitely in the clear," said Shaw Wu, an analyst at American Technology Research. "I don't think we have all the answers. At minimum, this investigation is still a distraction for the company."

 

Hurd, favored by investors for leading a comeback at HP since becoming chief executive in April 2005, said he had approved the sending of e-mails from a fictitious source in an effort to root out the media leaks. He apologized for the company's action.

 

HP has also said private investigators hired by the company had used false identities to obtain the phone records of directors, employees and journalists.

 

Fictitious e-mails may be common amid a flood of daily spam, but legal experts say they could still lead to legal trouble.

 

"Where you intentionally misrepresent the nature of a communication to get information, that's certainly a wrong," said Boston attorney Bruce Sunstein.

 

HP shares rose 1 percent in extended trade following Dunn's resignation on Friday. The stock had been largely unaffected by the controversy, but fell about 5 percent on Thursday on speculation that Hurd might have been closer than thought to the investigation.

 

COULD HAVE, SHOULD HAVE

 

Hurd told reporters HP still did not have all the facts about its inquiry into leaks dating back to 2005, but some of the findings are "disturbing." He acknowledged there was a written report of the investigation that he did not read.

 

"In the second phase, while many of the right processes were in place, they unfortunately broke down and no one in the management chain, including me, caught them," Hurd said.

 

"I understand there is also a written report of the investigation (the second phase) addressed to me and others but I did not read it. I could have, and I should have."

 

Nevertheless, Hurd defended the investigation, saying it was important to discover the source of the leaks and that he believed Dunn had the company's best interests in mind.

 

"It was the responsibility of the HP chairman to pursue the leak situation," he said at a news conference where he declined to take questions. "This was an appropriate course of action."

 

Mike Holston, an outside attorney for HP, said the company's investigation ranged from the review of internal e-mails and instant messages, to the surveillance of an HP board member and at least one journalist. He said investigators may have also sifted through individuals' trash.

 

The growing controversy has attracted the attention of California's attorney general, the U.S. Securities and Exchange Commission, Justice Department and a Congressional committee.

 

The scandal has tarnished the reputation of one of Silicon Valley's most venerable company's and taken away attention from Hurd's so far successful efforts to turn HP around after it ousted Carly Fiorina last year.

 

HP also said it appointed Bart Schwartz, a former U.S. prosecutor, to conduct an independent review of the methods the company used in its leaks investigation. Schwartz will report to Hurd and chief financial officer Bob Wayman.