RealTime IT News

HP Shareholders Levy Charge Against Execs

HP calls "baseless" a shareholder lawsuit claiming HP executives engaged in insider trading, selling HP stock weeks before the public revelation of an internal probe into media leaks.

"This baseless lawsuit represents a transparent effort to exploit issues related to HP's recent investigation for personal gain," the computer maker said in a statement. The company plans a vigorous defense, a spokesperson told internetnews.com.

The lawsuit, filed in Santa Clara County Superior Court, alleges the HP board knew the investigation of media and employees would soon become known and approved $10 billion in stock option buybacks "to keep company's stock price propped up" while executives sold their shares.

The HP executives should refund the money made because of the stock sales, as well as pay for the damages to HP's reputation, according to the lawsuit.

As previously reported, HP CEO Mark Hurd made nearly $1.4 million in stock option sales a week before the leak scandal became publicly known. Former HP Chairwoman Patricia Dunn made more than $4.8 million selling 125,000 shares of company stock between April 3 and Aug. 25, according to the lawsuit filed Wednesday on behalf of investors and a pension fund.

HP has said Hurd's stock sale "was fully proper" and took place within a three-week window the company allows for exercising stock options.

Patricia Dunn, who was fired for her role in the scandal, denied she benefited from insider trading. In the wake of the scandal and federal and state investigations, Dunn, along with HP's legal chief and three private investigators, plead not guilty to felony charges brought by California's Attorney General.

"Pattie Dunn has always had faith in HP and its future and has never sold any of her Hewlett-Packard stock," Dunn's lawyer, James Brosnahan of Morrison & Foerster, said in a statement. Dunn denied the lawsuit's claims she sold $4.38 million of HP stock.

The stock sales took place because "the market's perception of HP would be significantly damaged" when boardroom infighting became public. Ironically, following the scandal's disclosure and resulting executive upheaval, HP's stock bounced back.