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US: FBI, congressional panel open their own HP probes


Board meets again to discuss fate of chairwoman

by 
Benjamin Pimentel
San Francisco Chronicle
September 12th, 2006

The scandal surrounding Hewlett-Packard Co. escalated Monday when members of Congress and federal law enforcement officials announced they would launch inquiries into the tech giant's practices during a controversial probe of media leaks that began last year.

The new investigations, which join probes by the California attorney general and the Securities and Exchange Commission, came to light as the company's board met for a second straight day to discuss the fate of embattled HP Chairwoman Patricia Dunn.

The company is under heavy scrutiny for how it went about investigating its own board members after confidential information began appearing in the media in late 2005.

HP has admitted that investigators it hired used the method of "pretexting," in which individuals used false identities to obtain the private phone records of media members and directors.

While it remains unclear who authorized the use of these tactics, state Attorney General Bill Lockyer has said the use of pretexting is illegal.

Dunn, who oversaw the investigation, has taken the brunt of the criticism for the controversial investigation. Many observers, most notably former HP board member and Silicon Valley legend Tom Perkins, have called for her resignation.

Dunn recused herself from most of the discussion at board meetings held Sunday and Monday to discuss the issue. Board member George Keyworth, who has been accused of leaking the information to the media, also stayed away. In Dunn's place, the New York Times reported, the powerful Silicon Valley lawyer Larry Sonsini presided over a three-hour meeting Sunday that reconvened late Monday.

Despite a lack of action from the board, there was plenty of activity Monday surrounding the controversy.

The House Committee on Energy and Commerce sent the company a long list of requests, asking HP to reveal the name of the outside agency the company hired to conduct the investigation.

In a letter to Dunn, the committee also asked for the names of individuals who were targets of the internal probe and the names of individuals, including HP employees, who took part in the probe.

The committee also requested that HP turn over copies of "any contracts, letters of engagement, and investigative plans related to the leak investigation."

The committee specifically asked for any reports prepared by Wilson Sonsini Goodrich & Rosati, the Silicon Valley law firm that has worked with the HP board to address the scandal and that is headed by Sonsini.

The committee said it was "troubled" by the scandal, "particularly given that it involves HP -- one of America's corporate icons."

The U.S. attorney's office and the FBI also said Monday they were "investigating the processes employed" by HP to investigate the leaks, according to U.S. Department of Justice Spokesman Luke Macaulay.

HP confirmed the Justice Department inquiry Monday in an SEC filing, saying the company has been "informally contacted" by the U.S. attorney's office for Northern California.

The scandal began in early 2005 when the HP board, then led by Chief Executive Officer Carly Fiorina, became concerned after details of internal deliberations began surfacing in media reports.

Fiorina, who also chaired the board at the time, started an investigation. After she was fired later that year, Dunn, who succeeded Fiorina as chairwoman, pursued the probe, which eventually pointed to Keyworth as the source of the leaks.

But the investigation was conducted by an outside agency that used false identities to gather information.

Perkins, then a board member, protested the probe and quit in May.

HP said Keyworth has admitted leaking confidential information. But he has resisted the board's demand for him to quit. The HP board has announced that it will not renominate him to another term.

Regarding the spate of investigations of the company, HP said in its filing Monday, "We are cooperating fully with these inquiries."

The scandal has erupted at a time HP was bouncing back from years of uncertainty under Fiorina, who was replaced last year by CEO Mark Hurd.

HP Spokesman Robert Sherbin said Hurd learned about the board's findings in connection with the media leaks in March.

But Hurd was informed of the methods used to obtain information on Keyworth and members of the media only recently, Sherbin added.

These tactics included hacking into the phone records of reporters from the New York Times, Wall Street Journal, Business Week and Cnet.

"He rejects these methods and he reiterated that they will not be used again at HP," Sherbin said.





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