HP Probe Included Reporters, Family

Internal Investigation Possibly Illegal, Threatens Chairwoman's Job

(AP)  Incensed by several media stories that quoted unnamed people about information shared during HP board meetings, Dunn authorized the investigation earlier this year to find out if any of the company's directors were talking out of turn.

The inquiry convinced HP that George Keyworth II had been providing reporters with confidential company information. The company is punishing him by preventing him from running for re-election to the board.

In Friday's interview, Dunn branded the leaks as an "egregious breach" of HP's standards and emphasized the investigation was conducted with the full backing of the board. "This was not my spy campaign on our board." She also said "all this nonsense" could have been avoided had Keyworth admitted he was leaking information before the investigation began.

Now Dunn, 52, is scrambling to hold on to her $300,000-per-year job at HP amid an intensifying backlash against one of Silicon Valley's oldest and proudest companies.

The pretexting imbroglio already is threatening to become a huge distraction for the Palo Alto-based HP as it tries to build on its recent momentum in the personal computer and other high-target markets.

Dunn will have to resign if HP hopes to minimize the damage that already has been caused to its reputation, said Gary Lutin, a New York investment banker who advises shareholders on corporate control issues.

"Whether you consider the questions about (Dunn's) judgment to be resolved or unresolved, she is no longer in a position to be a viable chairman," Lutin said. "If the directors don't understand that, then they are not qualified to serve as fiduciaries for shareholders."

Dunn could still hold on to her job if she can convince other directors that she never authorized investigators to resort to pretexting, said Kirk Hanson, executive director of the Markkula Center for Applied Ethics.

Even if that is true, Dunn still might have difficulty explaining why she didn't confront investigators about how they obtained the phone records once they turned over to her, Hanson said. "Once they had the telephone logs, you would think someone would raise the question, 'How did we get these?"'

Dunn said she had no clue investigators would resort to pretexting, saying she didn't even know what the word meant until June or July — a few months after she authorized the investigation. She said she still doesn't know the identity of the firm behind the pretexting.

Viet Dinh, an attorney representing Perkins, said it's difficult to believe Dunn didn't know about pretexting before June. "To my knowledge, there are only two ways to get these kinds of records: with a government subpoena or with people's consent," Dinh said, asserting that HP's investigators didn't have that kind of privileged access.

The reporters targeted in HP's pretexting have been identified by their news organizations as: Peter Burrows, Ben Elgin and Roger Crockett of Business Week; Pui-Wing Tam and George Anders of The Wall Street Journal; Shankland, Dawn Kawamoto and Tom Krazit of CNET's News.com; and John Markoff of The New York Times.

The involvement of the reporters "takes the improprieties to a whole new level," said Dresslar, Lockyer's spokesman.

The pretexting backlash hasn't hurt HP's stock too badly yet. The company's shares rose 75 cents Friday to close at $36.17 on the New York Stock Exchange.

Unless drastic action is taken, it's only a matter before the brewing scandal begins to hurt HP, Lutin predicted.

"As long as this confusion and disorder continues, no self-respecting professional is going to want to work for Hewlett-Packard and the company will gradually be drained of talent," he said.

[proportion]

CBS is a bunch of dark-haired guys with a fetish for blonde women.

[rhopackard]

The problem isn't just with Hewlett Packard. The problem is "ethics". Large and small businesses alike no longer are running their operations based on ehtics and/or loyalty to their employees and customers.
The founders of the large corporations were successful at growing their company's because they believed in the "purpose" of their business. The business not only contributed to society's advancement by it's technology, but it also contributed by providing jobs locally to those who wanted and needed jobs, which also provided growth in our local economy.
Today, the majority of the business leaders are driven by one thing, "greed". Either they want to be #1 or they strive for the most moneys in the money market....no matter what the costs, (i.e. ethics, loss of jobs locally, etc...).

[oldthudman]

I worked for Compaq for 10 years and I was never impressed with the company integrity after Rod Canion was fired. The Digital people were even worse..........HP just seemed to be more of the same....I thought that after Fiorina
was axed I that maybe they would settle down to become a real company, "finally". Apparantly not.