Hewlett-Packard
Company's Patricia Dunn speaks during a news conference at HP headquarters
in a Palo Alto, Calif. file photo from March 30, 2005. Hewlett-Packard Co.
shoved Dunn off its board September 22, 2006, 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. [AP
Photo] |
Palo Alto, California - 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.
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.