MoneyWatch Tech

Mark Hurd Starts Sweating: HP's Real Reason for Dumping Him May Come Out

By Erik Sherman

Updated on: November 9, 2010 / 8:21 AM EST / MoneyWatch

Mark Hurd, ousted CEO of HP (HPQ), landed at Oracle (ORCL), the company of his buddy, CEO Larry Ellison. All seemed to be finally quiet -- other than Ellison's continuing stream of verbal abuse at business partner and competitor HP. But no longer. The letter that triggered airing of the whole Hurd saga is getting closer to being disclosed.

Hurd is fighting disclosure and for a good reason: it may contain allegations that he spilled details of the Electronic Data Systems acquisition to an outsider. And that could put a blot on his career that even Ellison might not be able to cover or ignore.

Apparently, the initial letter from Gloria Allred, attorney for former soft porn actress and "consultant" to Hurd, Jodie Fisher, is in the hands of a law firm, Robbins Umeda, that got the document from a client, an HP shareholder, through what it calls a "shareholder inspection process." Reportedly, HP agrees that there is nothing confidential in it. Not so, Hurd, whose lawyer is set to argue before a court that the information is confidential and should remain so, according to the Fortune article.

Aside from ego and image protection, something that might have gotten Hurd worked up enough to try and quash the letter is the accusation that he pass on information about the undisclosed EDS acquisition plans to Fisher:

The letter also said Mr. Hurd and Ms. Fisher discussed intimate details of the CEO's life, including his personal life at home. And it alleged that Mr. Hurd told Ms. Fisher of H-P's plan to buy EDS at a Madrid meeting that began near the end of March 2008. H-P had just made a confidential offer to buy EDS; it wasn't until May that H-P unveiled the $13.9 billion deal.Although H-P never publicly disclosed that claim, it has provided information to regulators about the facts underlying Mr. Hurd's departure, including the EDS allegation, said a person familiar with the matter. This person said H-P is barred by its agreement with Mr. Hurd from publicly disclosing the contents of the letter from Ms. Allred.

The Journal says that the ultimately reason the board of directors sent Hurd packing was because it lost confidence that Hurd would be honest. And that would clearly be a part of it. However, I think letting details of an upcoming but undisclosed merger would have been the real issue. If Fisher didn't buy or sell stock based on the information, it wouldn't technically be insider trading, but if Hurd did this once, what is to say that he wouldn't at some other time?

And if the board knew of the allegations and they kept him on nevertheless, could any of them hide from potential civil or even criminal investigation of any potential insider trading case in the future? It's one thing to forgive and forget. It's another to contemplate facing down a regulator or prosecutor, arguing that you had taken reasonable precautions, given past circumstances.

In an odd twist way, you might also say that it was Hurd's personal avarice that proved his downfall. Fisher's lawyer had suggested, as might be expected, that a settlement would make everything go away. Hurd was supposedly all for that, so long as HP was the one to pay. Had he coughed up what was probably a painfully large amount of money that would likely be less far less than what he made in a year, he might have kept a lid on the whole thing and retained his job at HP, which could have meant that Oracle and HP wouldn't have feuded ... at least not as loudly or publicly as they have.

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