Lawmakers Compare HP Saga To Enron

The saga of Hewlett-Packard Co.'s spying scandal — which has toppled the company's chairwoman, two other directors and at least two high-ranking executives — deepened in intrigue Thursday as lawmakers exploring the imbroglio summoned comparisons to Watergate and Enron.

Members of the House Energy and Commerce Committee demanded to know how investigators for the respected Silicon Valley anchor could use tawdry tactics such as "pretexting," or impersonating other people to obtain their phone records.

In one key document cited by the panel, an HP investigator had warned higher-ups, including the company's now-fired chief ethics officer, that the methods used to find the source of boardroom leaks were possibly illegal and at the very least could damage the company's reputation.

But few answers emerged. Ten people involved in the cloak-and-dagger operation — including the former ethics officer and General Counsel Ann Baskins, who resigned Thursday — asserted their Fifth Amendment right against self-incrimination, refusing to answer questions.

Former Chairwoman Patricia Dunn, who stepped aside last week as the scandal showed no signs of abating, told the panel that she had been assured that phone records had been obtained lawfully from public sources — and in previous investigations by the company on other matters.

"I deeply regret that so many people, including me, were let down by this reliance" on such advice, Dunn told the panel.

Dunn stumbled at turns and corrected herself when asked how much she knew of the shady tactics, including when she learned that the investigators had used pretexting to obtain telephone records. While saying she was unaware of the details, she repeatedly defended the probe as necessary to stem serious leaks of confidential information.

"My recollection was incomplete; I haven't seen all the evidence here," she said at one point. She said it wasn't until July that she became aware that pretexting was part of the "standard arsenal" of the investigators' tactics.

"I dispute having ever understood or being told that the fraudulent use of identity was ever a part of this investigation," Dunn insisted. She noted that she was "pretexted" as well; the probe targeted every member of the board, HP investigator Fred Adler testified.

The panel also heard from CEO Mark Hurd, who apologized for the investigatory tactics when he replaced Dunn as chair last week but denied having direct knowledge of the probe's methods.

"If Bill Hewlett and Dave Packard were alive today, they'd be appalled," he said, referring to the company's revered founders.

In addition to masquerading as HP directors, employees and as reporters to obtain their telephone records, company investigators surveilled their subjects and their relatives, sifted through their garbage and sent an e-mail with tracing technology in an attempt to dupe one reporter.

In testimony prepared for Thursday's hearing, Hurd said Dunn had told him of the existence of the investigation, "but I was not involved in the investigation itself."

"How did such an abuse of privacy occur in a company renowned for its commitment to privacy? It's an age-old story. The ends came to justify the means," his prepared testimony said.

Lawmakers on the committee expressed outrage at HP's actions.

"We have before us witnesses from Hewlett-Packard to discuss a plumbers operation that would make Richard Nixon blush were he still alive," Democratic Rep. John Dingell of Michigan said.

Other lawmakers said the situation was reminiscent of the Enron Corp. debacle, in which top management claimed not to know of serious wrongdoing that ultimately brought the company down. The panel members said the comparison was especially disappointing considering that HP, a 67-year-old computer and printer maker, has a reputation for integrity.

"It's a sad day for this proud company," said Rep. Diana DeGette of Colorado, the panel's senior Democrat. "Something has really gone wrong at this institution."

Rep. Ed Whitfield, R-Ky., chairman of the committee's investigative panel, demanded to know why, with many high-ranking HP executives and attorneys involved in the probe, "No one had the good sense to say `Stop.'"

The committee sought testimony from Ronald DeLia — the operator of the detective firm hired by HP — and two other key figures in the leak probe: Kevin T. Hunsaker, until recently the company's chief ethics officer, and Anthony R. Gentilucci, who managed HP's global investigations unit in Boston. They, along with outside investigators believed to have served as the foot soldiers in the company's efforts, took the Fifth.

That deprived the committee of an explanation of why HP higher-ups apparently dismissed one investigator's warnings that the probe was venturing into dangerous territory.

"I have serious reservations about what we are doing," Vince Nye, a senior investigator in HP's security department, wrote in a Feb. 7 e-mail. "I am requesting that we cease this phone-number gathering method immediately and discount any of its information."

As lurid details of the affair emerged in recent weeks, casualties have mounted at HP, which was No. 11 on Fortune magazine's most recent tally of the biggest U.S. companies. HP announced general counsel Baskins' resignation just ahead of the hearing.

Besides the inquiry by the House committee, federal and California prosecutors are investigating whether company insiders or outside investigators broke the law. California Attorney General Bill Lockyer has said he has enough evidence to indict HP insiders and contractors. And the Securities and Exchange Commission is pursuing a civil inquiry.

Larry Sonsini, HP's outside lawyer and one of Silicon Valley's most influential figures, also appeared at the hearing, urging Congress to clarify laws around pretexting. In June he told a former HP director that the spying probe was "not generally unlawful," but he insisted Thursday that he had not known its details at the time.

HP shares have been largely unaffected during the probe; investors are most concerned about the fate of Hurd, who is credited with turning around the company's performance in his 18 months as CEO. The shares gained 1.6 percent to close at $35.97 on the New York Stock Exchange.

"The biggest question facing HP right now is whether Mark Hurd comes out of these hearings with his credibility intact," said James Post, a Boston University professor specializing in corporate governance. "And his credibility is going to hang on how good a job he does handling all these tough questions. I doubt if he has ever been through something like this before."