Hewlett Packard and Pretexting

[RON430]

Let's give the politics a bit of a break. I think of myself as sophisticated in business practices but the unfolding HP soap opera has opened my eyes. It doesn't look like it was all that difficult for a company's "investigators" to get the private phone records of not only their own board members, without their knowledge or approval, but of nine reporters as well. Top management has taken the Enron defense that they didn't know it was going on or it was somebody else's call. Anyone feel like giving HP any personal information? Makes me wonder what lengths HPs board would go to in spying on their own employees or competitors? Whatever there was that was worthy of respect at HP died a long time ago. Their products have descended into low line consumer junk (sorry if that offends but I couldn't come up with a better word for it, I don't have a lot of respect for HP products anymore) anyway.

It is amazing how those with big resumes and considerable personal wealth can have the morals of an alley cat. No, strike that, it is an insult to the alley cats of the world to compare them to Patty Dunn and the rest of HPs board. I am not advocating being a pushover in business dealings, I respect a hard nosed but fair business person, but we have made a lot of prosperity for a lot of people, and in the bargain we have been willing to give up concepts of right and wrong when it puts money in our pockets. It's not like I am a big customer of or vendor to HP but I would just as soon have nothing to with a company that really seems to be rotten from the top down. Too many of those out there nowadays.

There will be no prize for the first post to blame either W or liberals for this miserable state. Maybe the mods can think one up for the first to blame both W and liberals but that is up to them.

[bitkahuna]

Honestly Ron, I've heard nothing of a scandal at HP. Guess I'll have to go look around...

[RON430]

Originally Posted by bitkahuna

Honestly Ron, I've heard nothing of a scandal at HP. Guess I'll have to go look around...

To make a long story short, when Carly was still at HP at the end, the press was getting reports leaked about the goings on of the board meetings. They dumped Carly and put in one of the board members as an acting chairwoman, Patty Dunn. She has been acting as chair ever since. She started an investigation to find the leaker. I think it was May this year that she announced that they knew who the leaker was. One of the board members, Perkins, a big time VC, asked how they found out. It turns out they hired investigators who had things like social security numbers so they were able to get info, like phone records, by pretending to be the account holder, which they feel they have legitimized by calling pretexting - getting the account records under a pretext. Perkins was so POd he resigned from the board on the spot. It ends up they got phone records, and who knows what else, on all the board members. Now it comes out that they also got phone records on nine reporters from places like CNET and the WSJ. Cali AG says he is preparing to file charges. Perkins contacted the legal advisor to the HP board, a big time valley lawyer by the name of Sonsini and wanted to know exactly what happened. Sonsini initially tried to blow him off but called him a week later and said that no laws were broken. And how did Sonsini get this info? He called HPs in house top lawyer and asked her if anything illegal was done and she said no.

That is my quicky review and I encourage you to find out a bit more and insure that you don't swallow my prejudices but this is apalling to me as an indicator of the business practices we have going on. I will grant you that the industrialists of a hundred years ago weren't great people but we have enough problems with our domestic industrial base without this nonsense going on. I hope a lot of these guys don't just lose their board gigs and regurgitate again in another one of their buddies companies but spend some time in the cross bar motel. I don't view VCs as having any morals but I give Perkins credit, he is the only one who did the right thing so far.

[bitkahuna]

Thanks for the excellent synopsis.

I wonder if Patty Dunn initially just ASKED the board who leaked? (And offering a chance to come forward privately.) She could have said if no one came forward she would have no choice but to launch an investigation. Might have avoided the need to go after everyone!

[1SICKLEX]

Originally Posted by RON430

To make a long story short, when Carly was still at HP at the end, the press was getting reports leaked about the goings on of the board meetings. They dumped Carly and put in one of the board members as an acting chairwoman, Patty Dunn. She has been acting as chair ever since. She started an investigation to find the leaker. I think it was May this year that she announced that they knew who the leaker was. One of the board members, Perkins, a big time VC, asked how they found out. It turns out they hired investigators who had things like social security numbers so they were able to get info, like phone records, by pretending to be the account holder, which they feel they have legitimized by calling pretexting - getting the account records under a pretext. Perkins was so POd he resigned from the board on the spot. It ends up they got phone records, and who knows what else, on all the board members. Now it comes out that they also got phone records on nine reporters from places like CNET and the WSJ. Cali AG says he is preparing to file charges. Perkins contacted the legal advisor to the HP board, a big time valley lawyer by the name of Sonsini and wanted to know exactly what happened. Sonsini initially tried to blow him off but called him a week later and said that no laws were broken. And how did Sonsini get this info? He called HPs in house top lawyer and asked her if anything illegal was done and she said no.

That is my quicky review and I encourage you to find out a bit more and insure that you don't swallow my prejudices but this is apalling to me as an indicator of the business practices we have going on. I will grant you that the industrialists of a hundred years ago weren't great people but we have enough problems with our domestic industrial base without this nonsense going on. I hope a lot of these guys don't just lose their board gigs and regurgitate again in another one of their buddies companies but spend some time in the cross bar motel. I don't view VCs as having any morals but I give Perkins credit, he is the only one who did the right thing so far.

Sounds like a case of business following the government here.

US and California authorities probe HP leaks
http://msnbc.msn.com/id/14700368/

By Richard Waters in San Francisco

Updated: 9:11 p.m. ET Sept 6, 2006
Hewlett-Packard has come under the scrutiny of Californian and Federal authorities over its handling of a board-level dispute that has led to accusations of illicit leaks to the press and illegal access by the company to its own directors' personal phone records.

The dispute spilled over into full view on Wednesday after the US computer group lodged its version of events in an official filing, countering accusations from a former director that have prompted an unusual public bust-up at the top of a large US corporation.


The row erupted over an internal investigation into the leaks that began early last year, shortly before former chief executive officer Carly Fiorina was sacked by HP's board.

Tom Perkins, who resigned as a director in May this year, has written to the company's board complaining that his own phone records were "hacked" by the company, and said he had stepped down "solely to protest the questionable ethics and the dubious legality of the chairman's methods" in conducting the internal leak investigation.

While it confirmed that an investigator hired by the company had obtained directors' phone records, HP said that the practice, known as "pretexting", was "not generally unlawful". It also said it had asked another director, George Keyworth, to resign for leaking board-level discussions to the press. Mr Keyworth had refused to step down and would not be renominated as a director at the annual shareholder meeting next year, the company said.

HP said it had received an informal enquiry from the California attorney-general asking for information about its handling of the internal investigation. Meanwhile, the Securities and Exchange Commission has sent the company a comment letter asking it to explain why it did not file a public disclosure about Mr Perkins' reason for leaving in May. At the time, HP said only that he had not left over a disagreement with the company.

Mr Perkins' phone records were accessed earlier this year, according to a letter sent to him by AT&T. According to a consumer advisory issued by the Federal Trade Commission, pretexting "is against the law".

In its filing, however, HP said it believed that at the time the practice was legal, though some states had since outlawed it. It added that it had been told by the outside investigator that the investigation was conducted within the law, though it had not been able to verify that directly.

In his letter to the company, Mr Perkins said that HP had an obligation under US securities law to disclose the reason for his resignation at the time he left. However, the company said that, since his dispute was a personal one with the company's chairman, Patti Dunn, and not over "any matter relating to HP's operations, policies or practices", its directors had concluded that the reason for his departure did not need to be reported.

"The underlying issue here is the obligation of Federal law that is imposed on company officers" to make proper disclosures, said Viet Dinh, a lawyer for Mr Perkins. HP's general counsel and company secretary should have concluded for themselves that a disagreement had occurred between Mr Perkins and the comapny, however its board of directors decided to characterise the event, he added.

Copyright The Financial Times Ltd. All rights reserved.

[RON430]

My understanding is that Cali AG looked at it after it started to gain more traction in the press. The opinion is that there have been criminal acts committed, both against Cali state law and Federal law. I am connecting dots here but the press has made a case that "pretexting" or essentially hijacking someones telephone account and getting their records is not that hard to do but it seems that HP had to give the social security numbers of the board members to the investigators. Then they contacted the relevant phone companies and set up e accounts and requested copies of phone records by using the social security numbers. If this is anywhere near the truth it makes my skin crawl. I think most of us here feel that big corporation privacy policies aren't worth the paper they are printed on but this is rubbing our noses in the fact that if a corporation wants to dig anything up on you, they have no restraints on what they will do. At least HP doesn't seem to have any qualms about obtaining personal phone records of their board members without their knowledge and then using the information for whatever purpose they feel like. I can buy off on a lot of what NSA has been asked to do to try and uncover some terrorists but that is not the case here. Just somebody talking to a reporter about board goings on around Carly Fiorina who they did decide to can. To make matters better, they are pretty convinced it was Keyworth and he has flatly refused to resign saying the stockholders put him there and they can remove him.

But I go back to what if HP determines there is money to be made by rifling through your personal phone records or checking account statements and if they have your SS number, such as being an employee or having an investigator turn it up on a competitor, they see absolutely nothing wrong in ripping away whatever privacy you have. Disgusting. And I doubt this is only a problem for HP. Sooner or later some of these guys have to go to prison to get them to treat us with a little respect. I hope it is sooner.

[RON430]

1SICK - the comments made by HP spokespersons rank right up there with a good Schultz "I know nothing!" The real shame is that just resigning this or that position still keeps you in the club and guarantees future board positions and perks. Ethics in business - what little there was is quickly being swept away by our modern management teams. Then again, it doesn't appear that very many people here have read up on this or are even very concerned. I guess we get the corporate management, and privacy, we deserve.

[1SICKLEX]

Originally Posted by RON430

1SICK - the comments made by HP spokespersons rank right up there with a good Schultz "I know nothing!" The real shame is that just resigning this or that position still keeps you in the club and guarantees future board positions and perks. Ethics in business - what little there was is quickly being swept away by our modern management teams. Then again, it doesn't appear that very many people here have read up on this or are even very concerned. I guess we get the corporate management, and privacy, we deserve.

I slept on this but you have me reading up. Very interesting.
Seems the CEO (Dunn) thinks she has the backing of the board. We all know how that can change.....
Someone will become the fall guy/woman for this...

As if we haven't all taken enough ETHIC courses and classes in recent years....People truly believe they are untouchable the higher they rank.

[RON430]

Originally Posted by 1SICKLEX

I slept on this but you have me reading up. Very interesting.
Seems the CEO (Dunn) thinks she has the backing of the board. We all know how that can change.....
Someone will become the fall guy/woman for this...

As if we haven't all taken enough ETHIC courses and classes in recent years....People truly believe they are untouchable the higher they rank.

Really is anybody's guess how it will play out but it appears that the hubbub is dying down. I take that to mean that most big businesses are doing such practices to spy on their executives, employees, competitors, etc., while sending out those monthly notices of their privacy policies. Ethics in business? Doesn't appear to be anywhere around here.

[RON430]

HP says Dunn resigns as chairman

Hewlett-Packard Co. (NYSE:HPQ - news) said on Tuesday Chairman Patricia Dunn will step down on January 18, 2007, after coming under fire for ordering a controversial board investigation into boardroom leaks to the media.

Chief Executive and President Mark Hurd will succeed Dunn as chairman, as well as retain his existing positions. Dunn will continue to serve on the board as a director.

HP also said director George Keyworth, who acknowledged being the source of the leaks, has resigned from the board.

The shake-up came after HP's board conferred for hours in emergency meetings on Sunday and Monday to grapple with the widening scandal, which has sparked an inquiry by California's attorney general that could result in criminal liability for identity theft and illegally accessing database information.

On Monday, federal prosecutors said they were also looking into the matter.

Dunn, 53, defended her decision to root out the source of the boardroom leaks, but she apologized for the tactics hired investigators had used, which include falsifying identities to access the private telephone records of directors and journalists.

"Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques," said Dunn in a statement. "These went beyond what we understood them to be, and I apologize that they were employed."

Analysts said Dunn's move will help HP defuse the scandal, which has distracted from the No.2 computer maker's strong business fundamentals.

"Somehow enough control was not exerted" during the investigation process, said Cowen & Co. analyst Louis Miscioscia. "Someone has to be held responsible. The logical person would be the one who is in charge."

HP's shares, which have largely been unaffected by the turmoil, were up 63 cents, or 1.73 percent, at $36.99 around midday.

Some analysts noted the trend in corporate governance would have been to keep the chairman and CEO roles separate, but others saw no problems in Hurd assuming both roles.

"Obviously the board has shown an element of dysfunctionality," said Charles Wolf, analyst with Needham & Co. "Putting Mark Hurd in charge ... makes a lot of sense."

Hurd said in a statement he would take action to ensure "inappropriate investigative techniques" will not be employed again.

"They have no place in HP," he said.

HP also said Richard Hackborn, who has served on the board since 1992 and was chairman in 2000, has been designated lead independent director, effective in January.

The company said last week that external investigators had used a practice known as pretexting, or faking identities, to obtain the private phone records of directors and nine journalists as part of the investigation into boardroom leaks.

Some leaks, which HP said disclosed sensitive information about internal deliberations, preceded the board's ousting of former Chief Executive Carly Fiorina in February 2005.

Thomas Perkins, the prominent and wealthy Silicon Valley venture capitalist who quit the HP board in May to protest the probe, on Saturday called on Dunn to resign as chairman.

Dunn, a former chief executive of Barclays Global, had said last week she had no plans to resign unless asked by the board. HP spokesman Ryan Donovan said on Tuesday that Dunn "stepped down voluntarily to minimize the distraction to the company."

California Attorney General Bill Lockyer said last week he believed crimes were committed in HP's leak investigation, but his office had not yet determined who was liable.

[RON430]

Well, it's not much but maybe there will be some repercussions.

HP execs asked to testify in Washington; shareholder sues company

SAN JOSE, Calif. (AP) — Several key figures in Hewlett-Packard's (HP) possibly illegal investigation of media leaks were asked Friday to testify before a congressional panel.

HP also faces a shareholder lawsuit over the scandal. The case, filed Friday in Santa Clara County, says the investigators' use of a controversial ruse known as pretexting had caused the company to suffer "substantial expense and damage."

The U.S. House Energy and Commerce Committee requested that HP Chairwoman Patricia Dunn and General Counsel Ann Baskins appear at its Sept. 28 hearing, a company spokesman said.

Attorney Larry Sonsini, who served as an outside legal adviser to HP during its investigation, was also asked to appear, as was Ronald DeLia, who runs a Boston-area private investigation firm that was hired by HP to conduct the probe.

The request was made as part of the panel's ongoing investigation into pretexting — the practice of impersonating a person in order to access their personal information.

Dunn has acknowledged that she authorized the probe in which private investigators hired by HP used Social Security numbers and other personal information to pose as company directors, employees and journalists in order to access logs of their home and cellular phone calls.

As HP's staff attorney, Baskins allegedly oversaw the leaks investigation and declared it to be legal.

An HP spokesman would not say whether Dunn and Baskins would testify.

"HP is fully cooperating with all ongoing investigations and inquiries, including the one being conducted by the House subcommittee," spokesman Mike Moeller said.

The lawsuit was filed on behalf of shareholder Juliet Worsham. It seeks to have Dunn, Baskins, HP CEO Mark Hurd and other company insiders found to have breached their fiduciary duties and abused their power. It asks for the defendants to reimburse Hewlett-Packard for any financial damage suffered by shareholders as a result of the pretexting scandal.

HP's stock has been all but immune to the boardroom scandal.

[1SICKLEX]

Originally Posted by 1SICKLEX

Someone will become the fall guy/woman for this...

And I quote myself

Yeah, stock is steady.

[RON430]

Originally Posted by 1SICKLEX

And I quote myself

Yeah, stock is steady.

Stay tuned, next week might be fun:

HP scandal takes on high weirdness level By BRIAN BERGSTEIN, AP Technology Writer

Hewlett-Packard Co. may be the world's largest technology company, but the superlative that better suits it these days is Provider of the World's Strangest Corporate Drama.

For two weeks, almost every day has brought revelations of questionable tactics that HP investigators used this year and last to root out who had been describing boardroom deliberations to the media. Corporate intelligence is an old and frequently practiced art, but HP's efforts feel more Watergate than Wall Street.

Not only did investigators impersonate board members, employees and journalists to obtain their phone records, but according to multiple reports, they also surveilled an HP director and a reporter for CNet Networks Inc. They sent monitoring spyware in an e-mail to that reporter by concocting a phony story tip.

They even snooped on the phone records of former CEO and Chairwoman Carly Fiorina, who had launched the quest to identify media sources in the first place.

And in a twist that might seem preposterous if it happened in a movie, The New York Times reported that HP consultants considered hiring spies to pose as clerical or custodial workers at CNet and The Wall Street Journal.

"It betrays a type of corporate culture that is so self-obsessed, (that) really considers itself not only above the law, but above I think ethical decency, that you have to ask yourself, where did the shame come in?" said Charles King, an analyst with Pund-IT Research.

Jeffrey Sonnenfeld, senior associate dean at the Yale School of Management, said the HP affair stands out even against similar episodes from the past, such as the 1991 incident in which Procter & Gamble Co. persuaded authorities to mine 803,000 phone bills to track leaks to a Wall Street Journal reporter.

"This sort of investigators-gone-wild behavior is in a novel realm," Sonnenfeld said.

Investors have shrugged off the scandal, with HP stock up slightly since the story broke. But there will be repercussions. The almost-certain illegality of posing as someone to obtain phone records has sparked state and federal probes into the computer and printer maker.

HP Chairwoman Patricia Dunn and the company's general counsel are testifying to a congressional committee next week about why they approved the investigations. Attorney Larry Sonsini, a Silicon Valley power broker who advised HP's board, is also being called onto the carpet.

Dunn has agreed to cede the chairmanship to HP's chief executive in January, but she plans to remain on the board. Fortunately for her — but perhaps disappointing for those entranced by this drama — her two biggest enemies are gone: Director Thomas Perkins quit in protest of the investigation tactics, while director George Keyworth resigned after being outed as a leaker.

Ironically, this was supposed to be a time in which HP had moved on from a period of extreme board dysfunction.

In 2001, Fiorina convinced skeptics on the board that HP should acquire rival Compaq Computer Corp., a deal that ended up costing $19 billion. She persuaded all of them except for one: Walter Hewlett, son of one of the engineers who founded HP in a garage in Palo Alto, Calif., in 1938.

Even while Hewlett remained on the board, he launched a dramatic and ultimately nasty fight to scuttle the deal. When shareholders narrowly approved the deal, Hewlett sued the company and alleged that Fiorina had improperly cajoled an investment bank to switch its vote.

Back then, talking to the press was actually a duty for some HP directors, who revealed details of board meetings in an effort to refute points made against the deal by Hewlett. Dunn, Keyworth and even Sonsini all spoke on the record to challenge Hewlett's descriptions of board deliberations.

Acrimony at HP didn't end even after the Compaq deal was sealed and Hewlett left the board in 2002. By 2005, the board's unhappiness with HP's uneven financial results under Fiorina emerged in news stories that began one of the leak hunts.

"There were conflicts on the board trying to make a go of the (Compaq) marriage, strong differences of opinions, strong personalities," said Bruce Oliver, director of the Center for Business Ethics at the Rochester Institute of Technology. "You've had a divided board for quite some time now. That somewhat set up the opportunity for this to happen at that company."

After the board fired Fiorina and turned to Mark Hurd, a lower-key, cost-cutting maven who had spent 25 years at NCR Corp, HP finally seemed to enter a quiet, successful phase.

Hurd's no-nonsense operational style thrilled investors; HP stock has nearly doubled during his tenure. Now that IBM Corp. has sold its personal-computer division, HP is surpassing Big Blue as the world's largest tech company by revenue. HP's other main rival, Dell Inc., has stumbled badly, further boosting HP's image in comparison.

Until all this.

HP spokesman Ryan Donovan would not comment about how the company expects to keep this scandal from leaving a long-term tarnish.

King, the analyst, said it could take a while to tell if HP's brand is diminished.

"If I'm a consumer, do I want to buy products from a company that has committed what looks to be felonious behavior? I don't know the answer to that," King said.

If nothing else, Hewlett-Packard will have aired in dramatic fashion the kind of corporate dirty work — often aimed at rivals rather than insiders — that "probably goes on more than we know of," said Eric Abrahamson, a professor of management at Columbia University.

"This is a particularly egregious example of it."

[RON430]

I know this isn't as much fun as the eternal quest to defend islam or condemn W but this just keeps getting better and better. I will never buy any HP product again, in a business world devoid of ethics these guys have a corporate culture that is exploring the depths. HP Way - what a joke.

The Associated Press
For the first time, investors seemed troubled by the scandal at Hewlett-Packard (HPQ) after three separate newspaper reviews of e-mail messages suggest Chief Executive Mark Hurd played a more direct role in an internal investigation of media leaks than previously disclosed.
HP stock was down $1.63, or 4.4%, at $35.15 in afternoon trading Thursday.

•The Washington Post reported that an e-mail message sent by HP Chairman Patricia Dunn suggested that Hurd approved an elaborate sting operation on a reporter in February in an attempt to plug media leaks.

•The Wall Street Journal reported that e-mails it reviewed suggest Hurd was kept abreast of the investigation early this year and offered some of his own suggestions about which HP directors might be leaking.

•The New York Times reported that investigators looking for the leakers sought a meeting last January with Hurd and Dunn. The Times said that it is unclear whether the meeting took place but that other exchanges confirm the level of concern over the leaks and indicate Hurd was pointing to possible leakers.

All of the newspapers reported on the e-mails in their Thursday editions. It is not clear whether they reviewed some or all of the same documents, which the papers said were provided to them by people with access to the company's internal investigation.

Hurd should testify at a House subcommittee hearing into possible illegal action by the company as it tried to find the source of leaks about its private board meetings, the panel's top Democrat told Reuters on Thursday.

Rep. Bart Stupak of Michigan, the senior Democrat on the House Energy and Commerce subcommittee on oversight and investigations, said he would consult with the panel's Republican chairman about Hurd's possible participation at the Sept. 28 hearing.

The Post, which said it obtained more than two dozen e-mails, provided the most detailed account of a planned sting operation involving sending bogus e-mails to a California reporter in an attempt to trick her into providing clues to who had been providing inside HP information to her previously.

The Post said it is not clear whether any of the e-mails it reviewed were to or from Hurd and that they do not detail what information he had when he approved the e-mail sting operation.

Hurd has arranged to brief HP directors Thursday and also had scheduled a news conference in San Francisco to be held Friday after the financial markets close.

Revelations of questionable tactics that HP investigators used this year and last to root out who had been describing boardroom deliberations to the media have been trickling out almost daily for two weeks.

Not only did investigators impersonate board members, employees and journalists to obtain their phone records, but according to multiple reports, they also had surveillance on an HP director and a reporter for CNet Networks who was the target of the e-mail sting.

They also snooped on the phone records of former CEO and Chairwoman Carly Fiorina, who had launched the quest to identify media sources in the first place.

Dunn has agreed to cede the chairmanship to Hurd in January, but she plans to remain on the board.

[RON430]

Maybe this will have legs. For any of you that have gotten interested, expect the testimony before Congress to be in the news next week, especially now that Hurd has been implicated.

Dunn resigns as HP chairwoman By JORDAN ROBERTSON, AP Business Writer
38 minutes ago

PALO ALTO, Calif. - Hewlett-Packard Co. Chairwoman Patricia Dunn resigned Friday, effective immediately, in the wake of the company's ill-fated investigation of media leaks.

In his first public comments on the boardroom spying scandal, HP Chief Executive Mark Hurd called the tactics used by the company's outside investigators "very disturbing," and apologized to journalists and others who were targeted by the probe.

HP had earlier said Dunn, who authorized the leak investigation, would step down from the chair in January and be replaced by Hurd, but remain a member of the board.

Hurd has succeeded Dunn as chairman.