HP Corporate Spying Case Mushrooms

What started out with Hewlett-Packard's board trying to keep a lid on its trade secrets has escalated into charges of corporate spying against its employees and espionage against rival Dell.

Karl Kamb Jr., who served as vice president of business development at HP, filed a claim late last week that the company's illicit tactic of pretexting and spying wasn't limited to its boardroom leak investigation. Kamb claimed in his suit that HP snooped into his personal telephone records during an investigation the company was waging against Kamb himself.

In a surprise move, U.S. District Judge Michael Schneider ordered Kamb to withdraw his counterclaim. He also ordered that, if Kamb wishes to refile, he do so under seal. Finally, he ordered Kamb and anyone else involved with the case not to talk to the press about the allegations in his counterclaim.

Kamb, who also claims HP instructed him to spy on rival Dell, was ousted from the PC maker in 2005 after being accused of stealing trade secrets. He was named as the defendant in a federal lawsuit filed in 2005. He denied the allegation and filed a counterclaim against HP in U.S. District Court in the Eastern District of Texas last week.

In a prepared statement HP said Kamb's counterclaim was "without merit."

"It's a blatant attempt to delay the prosecution of the original case against the individual filing the counterclaim," HP said. "We intend to vigorously pursue our original claim and to defend ourselves against this action with equal vigor. The claim that pretexting was involved in this investigation is, to the best of our knowledge, patently untrue. Furthermore, as we've said in the past, HP strongly rejects such methods of investigation and has said that those methods will not again be employed on behalf of the company."

Kamb's charges of pretexting come on the heels of HP's highly publicized scandal in which executives have been charged with spying on board members and their families, along with members of the media, during an investigation into a boardroom media leak. HP's investigators have been charged with impersonating people to illicitly obtain their personal phone records -- a tactic now widely known as pretexting.

The scheme was part of an overall intelligence operation that involved embedding "tracers" in e-mails sent to the press, making up phony personas to mislead and spy on reporters, falsifying documents and conducting physical surveillance.

This past September, chairman of the board Patricia Dunn resigned after being criticized for her knowledge of and participation in the investigation.

Last week, California state prosecutors offered to drop felony charges as part of a plea deal with Dunn and four other defendants. Authorities were seeking a single guilty plea on one misdemeanor charge that would eliminate all felony charges, according to an attorney involved. The week before, a Colorado private investigator pleaded guilty to identity theft and conspiracy charges, the first conviction arising from the HP board-room leak scandal, said a representative from the U.S. Department of Justice.

Kamb's claims against HP don't stop at pretexting, however. The former executive alleges that HP instructed him to spy on its rival, Dell. He says that around 2002, HP became concerned about Dell's presence in the printer business. HP hired Katsumi Iizuka, a former president of Dell Japan, so they could obtain information on Dell's plans for the lucrative printer business, claims Kamb. He adds that HP offered Iizuka a monthly stipend to act as a "competitive analyst" and even gave the project the code name "Dinner Inc." with special code names for Dell (Everest) as well as code names for other printer companies.

Outside of its prepared statement, HP declined to discuss any of Kamb's claims that the company asked him to monitor Dell's printer business.

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