HP Board Huddles For Two Days To Mull Probe

The board met Monday evening while a congressional committee, the U.S. Department of Justice, the California Attorney General, the Securities and Exchange Commission (SEC) and the Federal Communications Commission sought more information about the company's involvement in an investigation that invaded the privacy of nine journalists, as well as HP's own board members.

Using a shady technique known as "pretexting," third-party investigators, subcontracting for HP, pretended to be board members, journalists, and possibly journalists' family members to obtain records of calls made to and from the personal phones of journalists and board members. HP lawyers claim the company was unaware of the methods employed by people searching for the source of media leaks.

California Attorney General Bill Lockyer has called the actions "colossally stupid" and illegal. His spokesman Tom Dresslar said during a recent interview that, if charges are filed, they could come as soon as this week or next.

"We're really bird-dogging this," he said.

HP said the company is cooperating with inquiries.

Authorities are trying to determine who knew the investigators obtained the records and when.

The entire board learned in May that the probe had identified Director George Keyworth, a former science advisor to President Ronald Reagan, as the source of the leak. The board asked Keyworth to resign. He refused, and the board has since said they will not nominate Keyworth for another term.

Venture capitalist Thomas Perkins resigned during the May 18 board meeting in protest, saying he felt betrayed. A month later, he e-mailed HP's outside counsel Larry Sonsini, saying he had spoken with a law professor specializing in corporate governance about the meeting. Perkins claimed then that the professor informed him that subpoenas are required to monitor communications.

Sonsini warned Perkins in an e-mail that discussing the events at the board meeting, even with a lawyer, could be a breach of Perkins' duties. Several days later, Sonsini wrote that it appeared the "process was well done and within legal limits."

Perkins demanded that HP review the processes used in the probe, change meeting minutes to reflect that he resigned over a disagreement with Board Director Patricia Dunn regarding the probe and file an explanation of his departure with the SEC. The SEC requires companies to file an explanation if a board member resigns under certain circumstances, including disagreements over company operations. Perkins also notified the authorities currently investigating the probe.

Last week, after Lockyer issued a warrant to requesting Cox Communications to turn over information that would identify who pretended to be the board members, HP filed an explanation of Perkins' departure. The company characterized the filing as voluntary. It contained an admission that the company essentially subcontracted a firm that used pretexting, the practice of misrepresenting oneself to obtain private records of board members. Two days later, it came out that board members were not the only ones targeted. Nine journalists, including some from The Wall Street Journal and The New York Times, were snared in the probe as well. HP said Dunn and lawyers acting on HP's behalf had been assured the probe was legal. The filing said they later learned that pretexting was "generally" lawful, but they could "not confirm" that the methods used "complied in all respects with applicable law."

California authorities say it is illegal in their state, where HP is based, to misrepresent oneself in order to obtain someone else's personal records. Federal laws also prohibit the practice, but it is unclear whether the federal laws apply if the perpetrator does not gain financially by pretending to be someone else. The laws have been applied to more common forms of pretexting, in which companies sell the information, often to suspicious or estranged spouses.

Dunn, who has taken most of the heat for the probe, has claimed that she worked with lawyers and HP's security chief and a third-party firm ultimately conducted the probe. She said the probe was necessary because Keyworth violated the company's business practice standards. Dunn claimed she was unaware of the methods and people behind the investigation because she was a potential target.

Dunn has stressed the importance of stopping the leaks, which she said violate federal regulatory compliance laws. She said she was "appalled" and "embarrassed" about the tactics, as well as the fact that they targeted people with no formal ties to the company. She apologized directly to reporters and said that she did not initiate nor conduct the investigations, but the SEC filing states that she and an "internal group" initiated the investigations.

HP has declined to comment on whether its own employees or additional outsiders were snared in its probe.

The second largest personal computer maker has received high praise for corporate leadership on privacy issues. The global company states on its Web site that its privacy policies adhere to the strictest local laws.

In June, Scott Taylor, chief privacy officer for HP, told a U.S. House of Representatives committee that consumers must have faith in product quality and the integrity of their experience.

"They must trust that we will do right by them, particularly when it comes to protecting the privacy and security of their personal information," he said. "It is for this reason that HP operates one of the most rigorous global privacy policies of any major U.S. company."

Taylor explained why privacy is important.

"First, because it's the right thing to do," he said. "We have an obligation to fulfill the trust that HP employees have given us in handling their information. Second, because successful customer relationships are fundamentally about trust."