HP Probe Included Reporters, Family

The unethical and potentially illegal ruse used to root out media leaks on Hewlett-Packard Co.'s board extended beyond the directors and journalists to include a family member of at least one target.

Investigators hired by HP obtained the personal phone records of Thomas Shankland, the father of Stephen Shankland, a reporter at CNET Network Inc.'s News.com Web site who was one of nine journalists ensnared in the HP investigation.

It was unclear why the probe targeted Thomas Shankland, a semiretired physicist living in New Mexico. The younger Shankland is married to Associated Press reporter Rachel Konrad, who has also covered HP.

The addition of Shankland's father added to a growing scandal that embattled HP Chairwoman Patricia Dunn tried to defuse Friday in a series of media interviews. She described the investigators' tactics as "absolutely appalling" and "embarrassing" while defending the need to pursue the investigation to plug a leak on HP's board.

"I serve at the pleasure of the board," Dunn told the AP. "I totally trust their judgment. If they think it would be better for me to step aside, I would do that. But a number of directors have urged me to hang in there." She declined to say how many of HP's other nine directors support her.

The board plans to hold an emergency meeting by phone this weekend to discuss the concerns about the company's investigation as well as Dunn's job status.

California Attorney General Bill Lockyer already has concluded the HP investigation broke state law by obtaining people's private phone records under false pretenses — a charade known as "pretexting."

HP's investigators masqueraded as the directors and reporters targeted in the probe, using their Social Security numbers in some instances to dupe phone companies into turning over lists of personal phone calls.

Lockyer is still gathering evidence to determine the breadth of the violations and the culprits behind them, a process that he hopes to wrap up soon, his spokesman, Tom Dresslar, said Friday.

In a letter sent late Friday, U.S. Senator Richard Durbin, D-Illinois, asked U.S. Attorney General Alberto Gonzales to review whether HP's investigation broke any federal laws. "I am deeply troubled by these allegations," wrote Durbin, who wants to pass a federal law that would outlaw obtaining private phone records without an accountholder's consent.

The Federal Communications Commission also has taken the first step toward opening an investigation by sending a letter of inquiry to AT&T Inc., the source of the personal phone records obtained by HP.

The invasion of privacy so infuriated one HP director, longtime Silicon Valley venture capitalist Tom Perkins, that he resigned from the board in May and triggered a chain of events that finally forced the company to publicly disclose its role in the pretexting.

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.