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The Honolulu Advertiser
Posted on: Friday, September 29, 2006

Fingers point elsewhere in hearing on HP scandal

By Marcy Gordon
Associated Press

WASHINGTON — Hewlett-Packard Co.'s current and former board chairs readily agreed yesterday with outraged lawmakers that the storied Silicon Valley company had behaved horribly in trying to ferret out boardroom leaks.

Neither, though, was willing to take the blame.

Addressing a scandal that congressmen likened to Watergate and Enron — and which toppled Chairwoman Patricia Dunn, two other directors and at least three high-ranking executives — current Chairman and CEO Mark Hurd apologized for the tactics.

Those methods including "pretexting," — impersonating others to obtain their phone records — personal surveillance of directors, relatives and at least one journalist, sifting through their garbage and sending a reporter an e-mail with tracing technology.

"If Bill Hewlett and Dave Packard were alive today, they'd be appalled," Hurd said, referring to the company's founders. Like Dunn, he said he had been unaware of the investigation's details.

In one key document cited by the House Energy and Commerce Committee at its all-day hearing yesterday, an HP investigator had warned higher-ups that the methods were possibly illegal and at the very least could damage the company's reputation.

Few answers emerged, however, about how the investigation descended into such tawdry tactics.

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

Dunn, who was replaced as chair by Hurd last week, endured hours of questioning, in which she stumbled at times and corrected herself when asked how much she knew of the shady methods. But while saying she was unaware of the details, she repeatedly defended the probe as necessary to stem serious leaks of confidential information.

"If I knew then what I know now, I would have done things very differently," Dunn said. Still, she said, "I do not accept personal responsibility for what happened."

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. Like other HP directors and journalists who were targeted in the probe, she, too, ended up being pretexted, Dunn said.

Fred Adler, an investigator in the company's security department, told the panel he had heard that Vince Nye — his colleague who had warned superiors on the boardroom leak probe — also had complained about previous use of pretexting.

HP's outside lawyer, Silicon Valley power broker Larry Sonsini, who appeared with Dunn, insisted that contrary to recent news reports, he never took the position that pretexting is legal. He also said he and his firm were "not involved in the design or conduct of the investigations."

Lawmakers on the committee expressed outrage at HP's actions and disbelief that Dunn and others didn't realize that obtaining personal phone records from people without their consent could be illegal.

"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.

"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."

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.

Other 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. The Securities and Exchange Commission is pursuing a civil inquiry.