HP chair resigns amid probe fallout

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By JORDAN ROBERTSON, AP Business Writer

Sat Sep 23, 1:59 AM ET

 

 

 

PALO ALTO, Calif. - Hewlett-Packard Co. shoved Chairwoman Patricia Dunn off its board Friday, severing its ties to a leader whose efforts to plug a media leak morphed into a spying scandal that has spawned criminal and congressional investigations.

 

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The Palo Alto, Calif.-based company will turn the chairmanship over to its chief executive, Mark Hurd, who was supposed to take over that job in January as part of a realignment announced two weeks ago.

 

But things have changed since then amid a wave of leaked documents revealing how deeply HP's investigators intruded into the personal lives of seven directors, nine journalists, two employees and family members of those targeted individuals.

 

Dunn authorized the investigation and received regular updates, although she said she didn't realize HP's investigators were going to such extremes.

 

Two other HP employees who played pivotal roles in the scandal are also being let go, according to a person familiar with the matter. They are Kevin Hunsaker, HP's chief ethics officer, and Anthony Gentilucci, who manages HP's global investigations unit in Boston, according to the person, who asked not to be identified because the terms of their departure were still being negotiated.

 

"Now that we know the depth of what has transpired, I take full accountability to drive the actions to set it right," Hurd said at a Friday news conference to announce Dunn's departure as well as review what the company has learned about its spying program.

 

Dunn had previously planned to remain an HP director after relinquishing the chairmanship in January, but now she is leaving the board entirely.

 

"I continue to have the best interests of HP at heart and thus I have accepted the board's request to resign," Dunn said in a statement.

 

Dunn, 53, continued to defend her decision to initiate the probe to identify the boardroom leak and reiterated her intention to appear Thursday before a congressional panel looking into HP's spying spree.

 

Determined to protect confidential board discussions, Dunn hired investigators who impersonated board members, employees and journalists to obtain their phone records. The detectives also spied on an HP director and concocted an e-mail sting to dupe a reporter for CNet Networks Inc.'s News.com, an online technology site.

 

Hurd on Friday acknowledged authorizing the bogus e-mail, but said he didn't recall approving the use of software to trace the reporter's computer. He also said he attended a meeting in March where he was briefed on the investigation, but said he did not read a written report that included the identity of the leaker and details of the detectives' tactics.

 

"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.

 

Cindy Shaw, an independent technology analyst who formerly worked for HP, said Hurd's explanation about his involvement in the probe will likely calm investors worried that he might get sucked into the maelstrom. Hurd, hired as CEO nearly 18 months ago, is highly regarded on Wall Street because the company's fortunes have soared since his arrival.

 

"With the appearance that Mr. Hurd did not have direct knowledge of anything unseemly until after the fact, we think this will stem the death by 1,000 cuts that has been occurring," Shaw said.

 

HP shares gained 24 cents to close at $35.11 on the New York Stock Exchange, then added another 44 cents in extended trading after Hurd's explanation. The stock had slid by more than 5 percent amid reports that Hurd may have been more involved in the spying program than previously thought.

 

But the company has more to worry about than its stock price.

 

California Attorney General Bill Lockyer and several federal agencies are investigating whether HP and its executives broke any laws in their crusade.

 

Hurd so far isn't among the group of HP insiders that Lockyer expects to charge, spokesman Tom Dresslar said Friday. But the attorney general is still examining Hurd's role in the scandal. "We are not ruling anybody out in terms of criminal culpability, Dresslar said.

 

Hurd also said Friday he plans to appear at the hearing being held by the House Energy and Commerce Committee. Dunn and General Counsel Ann Baskins, who also played a central role in the spying program, previously accepted the panel's invitation to appear.

 

Tom Perkins, who resigned from the board in protest of the spying tactics, praised the board's decision in a statement released through a spokesman.

 

"Mark Hurd has shown that he is the right man to take HP to new heights," Perkins said. "I would like to thank Pattie Dunn for stepping aside, allowing Mark Hurd to lead and HP to move on."

 

Hurd also announced two other changes: Director Richard Hackborn was named the company's independent lead director, and a former federal prosecutor, Bart Schwartz, was hired to review of the company's investigative methods and business practices.

 

Hurd was flanked on stage by attorney Mike Holston, who was hired Sept. 8 to unravel Dunn's ill-fated leaks investigation.

 

He said the chain of command started with Hunsaker and included Gentilucci, Vincent Nye of HP's Global Security team, and Fred Adler of the company's IT security arm. They contracted Ronald DeLia of Security Outsourcing Solutions, near Boston.

 

The team gave regular updates to Dunn and Baskins, assuring them the tactics being used were legal.

 

There was one instance in January in which Gentilucci gave the Social Security Number of an HP employee to Security Outsourcing Solutions, Holston said.

 

The same month, Security Outsourcing Solutions forwarded Social Security numbers for three journalists, three current or former board members, and one HP employee to another contractor, Action Research Group.

 

Holston said his firm also found one other instance, in March, in which Security Outsourcing Solutions used a journalist's Social Security Number to obtain telephone records.

 

Physical surveillance was also used to track directors and journalists, including an investigator who shadowed a board member and his family and watched the home of a journalist, Holston said.