Controversy

Controversy

HP pretexting scandal

Main article: 2006 HP spying scandal

On September 5, 2006 Newsweek published a story[30] revealing that the chairwoman of HP, Patricia Dunn, had hired a team of independent electronic-security experts that later spied on HP board members and several journalists, to determine the source of a leak of confidential details regarding HP's long-term strategy in January, 2006. The independent, third party company used a technique known as pretexting to obtain call records of HP board members and nine journalists, including reporters for CNET, the New York Times and the Wall Street Journal. Dunn has claimed she did not know the methods the investigators used to determine the source of the leak.[31] Board member George Keyworth was ultimately outed as the source.

On September 12, 2006 Keyworth resigned from the board and HP announced that Mark Hurd, the current CEO and president, would replace Dunn as Chairman after the HP board meeting on January 18, 2007.

On September 22, 2006 Hurd announced at a special press briefing that Dunn had resigned effective immediately from both the Chairmanship role and as a director of the Board;

On September 28, 2006, Ann Baskins, HP's general counsel (head attorney) resigned[32] hours before she was to appear as a witness at which she would later invoke the Fifth Amendment to "not be held to answer for a capital, or otherwise infamous crime."[33]

Investigation by the government

On October 4, 2006, California Attorney General Bill Lockyer filed criminal charges and arrest warrants against Kevin Hunsaker, Dunn and three outside investigators.[34] On September 11, 2006, the United States House Committee on Energy and Commerce wrote to Patricia Dunn stating that they have been conducting an investigation on Internet-based data brokers who allegedly use "lies, fraud and deception" to acquire personal information, and allow anyone who paid a "modest fee" to acquire "itemized incoming and outgoing call logs", and when had learned about HP's use of pretexting through their September 6 SEC filing and through their own inquiry of HP's Nominating and Governance Committee, stating they are "troubled" by the information, "particularly that it involves HP—one of America's corporate icons."

The committee requested, under Rules X and XI of the United States House of Representatives, information from HP by September 18, 2006:

At the September 28, 2006 hearing, Dunn and Hurd[35] both testified extensively about the investigation. Dunn testified that until June or July 2006, she did not realize that "pretexting" could involve identity misrepresentation. Dunn repeatedly insisted that she had believed that personal phone records could be obtained through legal methods.

Other witnesses refused to answer questions due to the ongoing criminal investigations.[33]

Perceived impact on the company's operations

Despite the intense media coverage, investors continue to show faith in the company. As of October 23, the price of the company's stock had increased from $36.50 to $39.87 per share.[36]

On October 8, 2006 Reuters ran a story describing pretexting used by Hewlett-Packard and other companies.[37]

On October 12, 2006 hp announced the appointment of Jon Hoak as vice president and chief ethics and compliance officer. Hoak served as senior vice president and general counsel for NCR from 1993 until May 2006.[38]

On December 7, 2006 hp paid $14.5 Million to settle civil charges brought by the California Attorney General.[39]

In December 2006, two members of Congress requested that HP provide more information regarding CEO Mark Hurd's sale of $1.4 million of stock options on August 25, the same day he was questioned by attorneys investigating the pretexting scandal.[40] Mark Hurd explained that the August trade was part of his normal investment strategy to diversify assets and was made during a regularly scheduled trading window for senior officers and directors.[citation needed] Additionally, Hurd assured the Subcommittee that the August trade had nothing to do with his interview by attorneys investigating the leak investigation and that he had initiated the trade before any such request had been made to him.