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.