HP Takes a Capitol Beating

WASHINGTON –- Hewlett-Packard took a Capitol Hill hammering Thursday over its handling of a boardroom media leaks probe gone awry.

Chairman and CEO Mark Hurd’s late afternoon testimony wrapped up a long, embarrassing day for HP  as lawmakers criticized both the ethics and dubious legal practices of one of the Silicon Valley’s most respected companies.

“We had breakdowns on all levels,” Hurd said. “The responsibility runs all across HP.”

He added, “I wish I had asked more questions. There are signs I wish I had caught.”

When asked if he had ever been part of anything like the HP pretexting scandal in his 25 years in corporate America, he said, “I’ve never seen anything like this.”

HP has admitted using pretexting – lying to access the personal telephone records of board members and journalists. HP also acknowledges it created a sting operation creating a fake employee to correspond with a reporter.

The HP team in charge of the sting also placed tracking software on the reporter’s computer.

Hurd, as he has insisted since the scandal broke earlier this month, said he was aware of the HP probe – in fact, approving HP’s resources for it — into the leaks, but he had no knowledge that pretexting was used.

He also admitted he knew of the fake employee e-mail to a reporter. He said he only found out about the tracing software after the HP internal investigation.

“To the best of my memory, I don’t remember anything about spyware,” Hurd said.

When asked why he didn’t read a report sent to him on the status of the investigation, Hurd told lawmakers, “It was a matter of attention to detail. The CEO can’t be the backstop for everything.”

Rep. Ed Whitfield, the Kentucky Republican in charge of the House Energy and Commerce’s Subcommittee on Oversight and Investigations, asked Hurd, “Do you think it’s ethical to send fake e-mail to reporters?”

“At the time I agreed [with the HP investigative team],” he replied. “In hindsight, I wouldn’t do it again.”

Without pointing fingers, Hurd, who took over as HP’s CEO last year, said the investigation was in the hands of Patricia Dunn, the company’s former non-executive chairman who resigned last week.

Hurd said boardroom leaks are clearly a violation of HP’s Standards of Business Conduct.

“It has been the responsibility of the chairman of the board…to pursue leaks from the board of directors and that responsibility has been taken very seriously,” he testified.

On a day when HP’s general counsel resigned just hours before joining nine other former HP employees or contractors invoking their Fifth Amendment right against self-incrimination, lawmakers had few kind words for the company.

“It’s funny to me that if you have to invoke your Fifth Amendment right, you’re doing something legal,” House Energy and Commerce Chairman Joe Barton (R-Tex.) said at a packed hearing.

Rep. Diana DeGette (D-Colo.) said, “Something has gone wrong – terribly wrong – at this once venerated institution.”

Rep. John Dingell (D-Mich.) accused HP of “gross stupidity.”

The panel originally called 14 witnesses for Thursday’s hearing, but by the time 10 of them invoked their Fifth Amendment right, lawmakers were left with only two HP employees: Hurd and Fred Adler, head of HP’s IT security investigations.

Also testifying were Dunn and HP outside counsel Larry Sonsini.

Lawmakers labored throughout the day attempting to put a smoking gun in Dunn’s hand.

First and foremost, they wanted to know just exactly who on the corporate level approved the pretexting that was carried out much further down the chain of command.

Dunn, though, repeatedly insisted HP lawyers and others told her everything was being done legally and above board.

She told the panel that she first learned of pretexting being used by HP in January, after HP launched an internal investigation of its own probe.

Working from a treasure trove of documents provided by HP, DeGette produced a copy of notes from a meeting between Dunn and HP general counsel Ann Baskins in June of 2005. The note refers to pretexting.

Dunn said she had “no recollection” of the conversation with Baskins. She added, “At least in the context we’re using it today.”

The panel also produced documents by former HP private investigator Ron DeLia stating he discussed pretexting with the HP board in 2005.

Asked to explain the differences between DeLia’s statements and her own, Dunn responded, “I can only say I’m here today testifying under oath and he is not.”

The panel pushed Dunn hard on whether she ever questioned how HP came up with the personal telephone records used in the probe.

“Here’s what I’ve been told: what was done was done within a legal sense,” Dunn said.

In her detailed written testimony, Dunn said she turned to Baskins when it came to conducting the investigation.

Baskins, in turn, introduced her to Kevin Hunsaker, HP’s senior counsel and director of ethics.

According to Dunn, Hunsaker, working with Boston HP security manager Anthony Gentilucci, spearheaded the investigation, which eventually involved using a number of contract private detectives.

Dunn insists, “I relied on trusted people who were lawyers and investigators to perform [the investigation]. Along the way I requested for and received assurances that the investigation was both legal and compliant with HP’s Standards of Business Conduct.”

Dunn, Baskins, Hunsaker and Gentilucci all resigned from HP within the last week.

Pretexting for financial information is illegal under federal law. Whether it’s legal to use the technique for obtaining telephone records is disputed among lawyers and lawmakers.

Bills are pending in both the House and Senate that would specifically ban pretexting for telephone records. With both chambers set to adjourn Friday for the fall elections, the legislation stands little chance of approval.

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