Updated 9:55 p.m. ET
Hewlett-Packard Co. ousted CEO Mark Hurd on Friday for falsifying expense reports and other documents to conceal a secret relationship with a former contractor and help her get paid for work she didn't do.
Until the 53-year-old abruptly resigned, sending HP's stock tumbling after hours, he had a nearly bulletproof reputation on Wall Street. During his five-year stewardship of the world's biggest maker of personal computers and printers, its stock price had doubled, boosting its market value more than $40 billion and it became the world's No. 1 technology company by revenue.
HP said Hurd was forced out after the company discovered he had a relationship with a woman who worked with HP on marketing matters. The company said he falsified expense reports and other financial documents to conceal the relationship and help get the contractor paid for work she didn't do.
On a conference call with the media Friday afternoon, HP General Counsel Mike Holston also said that Hurd was found to have filed inaccurate expense reports and other financial documents to conceal the relationship and help get the contractor paid for work she didn't do, according to CNET's Erica Ogg.
But the company said its internal probe found Hurd didn't violate its sexual harassment policy.
High-profile Los Angeles attorney Gloria Allred said she is representing the woman and "there was no affair and no intimate sexual relationship" between her client and Hurd. Allred, reached by The Associated Press late Friday, declined to comment further.
The allegations were first disclosed Friday, though the company learned of them several weeks ago.
Hurd said it was a "painful decision" to leave but acknowledged there were "instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP." He will get a $12.2 million severance payment.
A person with intimate knowledge of the case told the AP that the woman worked as a host for more than a dozen events for CEOs that Hurd attended between 2007 and 2009. The person said the disputed expenses range from $1,000 to $20,000 for travel, lodging and meals.
This person, who requested anonymity because this person wasn't authorized to speak publicly about the details of the investigation, said many of the expenses were for meals after the events and that Hurd insists they were legitimate business expenses.
Hurd has offered to repay expenses that were incorrectly filed, this person said.
The company's chief financial officer, Cathie Lesjak, 51, was named interim CEO. She has been with the company 24 years but has taken herself out of the running to fill the position permanently. HP has set up a search committee to look for a permanent replacement.
Mark Kelleher, an analyst with Brigantine Advisors, said Hurd's resignation boils down to "one person doing some really stupid things."
"That gave a great deal of comfort to investors that this was not a company-fundamental issue," he said.
Still, HP's shares - which closed Friday on the New York Stock Exchange at $46.30 - tumbled after hours to $41.85 as investors reacted to the stunning news of his resignation.
Preliminary financial results HP released Friday for its fiscal third quarter came in slightly above analyst expectations.
Beloved by investors for his relentless cost-cutting - and scorned by thousands of laid-off employees for the same - Hurd was seen as rescuing the company from the mess left behind by his ill-fated predecessor, Carly Fiorina.
Hurd has transformed the 71-year-old company from a computer and printer maker hooked on profits from printer cartridges into a company that looks a lot like its archrival IBM Corp., a major player in technology services and other fast-growing areas.
Though their underlying stories are very different, Hurd's departure is like Fiorina's in one key way: Both were forced out with the company about to reap the benefits of sweeping changes they made at the Silicon Valley institution.
Fiorina left in 2005 in the wake of her decision to acquire Compaq Computer and an ensuing upheaval over her personality and her business strategies, but the divisive deal proved instrumental in HP's ascendance under Hurd.
By comparison, Hurd is departing after cutting tens of thousands of jobs and launching an expensive expansion, including the $13.9 billion acquisition of technology-services provider Electronic Data Systems, the $2.7 billion takeover of computer-networking equipment maker 3Com Corp. and the $1.4 billion deal for mobile phone maker Palm Inc.
HP general counsel Michael Holston said on a conference call Friday with analysts that Hurd's actions concerning the contractor showed "a profound lack of judgment." He said Hurd's "systematic pattern" of submitting falsified financial reports to hide the relationship convinced the board that "it would be impossible for him to be an effective leader moving forward and that he had to step down."
"The facts that drove the decision for the company had to with integrity, had to do with credibility, had to do with honesty," Holston said, declining to elaborate further on specifics.
Holston said the inaccurate financial reports "related to Mark's conduct with this specific individual and wasn't broader than that."
HP said it became aware of the relationship several weeks ago when the former contractor accused Hurd and the company of sexual harassment. An investigation found that HP's sexual harassment policy wasn't violated but that its standards of business conduct were.
Hurd and Robert Ryan, HP's lead independent board member, said Hurd's departure has nothing to do with the company's financial health.
To reassure investors, HP, based in Palo Alto, previewed its third-quarter results late Friday in advance of a detailed report Aug. 19.
The company said it expects to report earnings of 75 cents per share, compared with 67 cents a year earlier. Excluding one-time items, the company earned $1.08 per share, a penny ahead of analysts' current expectations. Revenue is expected to rise 11 percent from last year to $30.7 billion, slightly higher than analysts' expectations.
The company's forecast for the current quarter, which ends with its fiscal year in October, is roughly in line with analysts' expectations.