September 8, 2006 1:08 PM PDT
HP chairman: Use of pretexting 'embarrassing'
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"I am not happy that the way this investigation has been conducted has led to this major embarrassment," Dunn said in an interview with CNET News.com. Asked if she believed pretexting is illegal, Dunn replied, "I have no idea, but it's wrong."
Dunn has been at the center of a controversy involving the ordinarily secret activities of HP's boardroom. After leaks to the press beginning in 2005, Dunn ordered an investigation of board members that led one to resign and another not to be renominated.
In pretexting, one person masquerades as another to obtain private information such as phone records. HP said in a U.S. Securities and Exchange Commission filing that it hired an investigation company to try to track down board leaks to the media. The company in turn hired a contractor that used pretexting to scrutinize board members, HP said. The technology giant acknowledged on Thursday that the phone records of nine reporters, including two from News.com, were also accessed.
Dunn has no plans to resign, she said. "If the board wants me to resign, I will absolutely accept their judgment on this," Dunn said. "I have full confidence that if they ask me to, it'll be the right thing to do for shareholders."
The board will have an opportunity to discuss the investigation and its consequences on Sunday. The directors scheduled a meeting by telephone conference call, HP spokesman Ryan Donovan said. Such phone meetings are scheduled "from time to time...on other issues that come up," he said.
And HP has taken measures to ensure that pretexting won't be a problem for it again. "Pretexting will no longer be permitted as a part of any HP investigation," Dunn said.
HP has refused to disclose which company it hired for the investigation, and Dunn also wasn't forthcoming. "I don't know what the name of the firm is," she said. "I worked through HP resources to get the outside firm," which HP also used in the past, she added.
But Dunn was closely involved in the investigation, according to Tom Perkins, the board member who resigned. According to a June 20 e-mail posted on The Wall Street Journal Web site, Perkins told HP's outside legal counsel, Larry Sonsini, "Larry, the investigation was a Pattie Dunn program, 100 percent conceived of and managed by her, and unknown to the board, except perhaps in the most vague and imprecise terms, with the possible exception of Mark, who she may have briefed."
Dunn also didn't know if investigators had used pretexting to examine HP employee records, she said. She said she learned of the use of pretexting to access journalists' phone records on Wednesday.
The probe included accessing phone records of two CNET News.com reporters, Dawn Kawamoto and Tom Krazit, according to the California attorney general's office. The two co-wrote a Jan. 23 story about a private, long-term strategy session held by HP's board of directors. The Wall Street Journal reporters Pui-Wing Tam and George Anders and The New York Times reporter John Markoff also were targeted using pretexting, those publications said.
Dunn personally apologized to the CNET News.com reporters Friday. "The information that has recently come to light about the involvement of reporters and the way they're involved in this investigation is highly regrettable, and I want to apologize individually on behalf of this board," she said. "Nobody had that in mind when this investigation was undertaken."
Indeed, she said, the investigation should have been conducted according to HP's standards.
"That investigation was authorized on the basis that everything done would be not only legal but fully compliant with HP's high standards for both ethics and business practices," she said. "I received assurances about that at every step of the way."
Dunn also went on the offensive in the interview, lashing out more than once at those whose leaks led to the investigation.
"This is a board who has suffered for a long period of time from egregious breaches of standards of business conduct. The board asked me to do something about it," she said. "Many directors thought the top priority was to figure out how to plug the leaks. We couldn't function as a board with these leaks continuing. This was not my spying on the board."
The leaking also has hurt HP's image, she said.
"HP's reputation has been damaged by a leaker who refused to come forward knowing this investigation was going on," she said, a person who "lied to the rest of the board, by omission and commission, about the fact that he was the source of this information for a long period of time."
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