September 5, 2006 3:54 PM PDT

Media leaks prompt HP board shake-up

Angered by information leaked to CNET News.com, Hewlett-Packard launched an investigation of its own board members that caused one director to resign and is reportedly leading to another not being renominated to the position.

On Jan. 23, CNET News.com reported that HP's directors and CEO Mark Hurd met for several days at the posh Esmeralda Resort & Spa in Indian Wells, Calif., to craft HP's long-term strategy. The article apparently angered HP Chairwoman Patricia Dunn, leading her to authorize an investigation to determine the story's source.

But when Dunn informed fellow HP director Tom Perkins of her plans, Perkins, the chair of HP's corporate governance committee, told Dunn to simply ask the directors who was the source cited in the story and to seek an apology.

Perkins was stunned to learn at a board meeting in May that Dunn went ahead with the investigation nonetheless. That investigation allegedly revealed the identity of the source, whose name was disclosed to the directors. Perkins resigned in protest, despite the company determining he was not the source of the leak, two sources have confirmed to CNET News.com.

A private investigator hired by HP allegedly hired a data broker to gather information on telephone calls made and received by the directors, sources said.

Sources say California's attorney general and federal investigators are investigating the possible use of "pretexting" in the investigation. Pretexting is the practice of obtaining phone records through deceptive means.

Patricia Dunn Patricia Dunn

The technology giant is expected to file documents with the Securities and Exchange Commission as early as Wednesday, providing more details about Perkins' resignation, according to sources. Perkins has asked HP to provide more disclosure on the reasons he resigned. (Wednesday update: In its SEC filing, HP acknowledged the use of pretexting and offered other details of the investigation.)

The Wall Street Journal reported on its Web site Tuesday afternoon that board member George Keyworth will not be renominated to the board because, the company claimed, he disclosed confidential information to the press. (CNET News.com has a policy of not commenting on the identity of sources who ask for and are granted anonymity.)

An HP representative declined to comment on the allegations regarding telephone records, but said the company plans to make a voluntary filing on Wednesday with the SEC concerning the resignation of Perkins that will also have more information on Keyworth. But the representative declined to comment on the specific information in the filing ahead of its release.

Tom Perkins Tom Perkins

Perkins, over the last several months, had expressed concern to HP over its alleged actions in securing telephone logs of his private residence and of his long-distance calls, sources said. Perkins requested information from AT&T on whether his local and long-distance accounts had been accessed and was informed that, indeed, information had been obtained in January and in early February, according to sources. (To see letters and e-mail to and from Perkins regarding these matters, including his charge that "my personal phone records were 'hacked'", click here.)

With his concerns mounting, Perkins asked that the minutes of the May 18 board meeting be reflected in the Securities and Exchange Commission filing that addressed his resignation, sources said.

Perkins' attorney, Viet Dinh, an attorney with Bancroft & Associates in Washington, D.C., declined to comment, other than noting: "Tom resigned over a fundamental disagreement with HP's corporate governance practices. HP has refused to disclose this, and Perkins will pursue the appropriate remedies."

HP announced the resignation of Perkins, a Silicon Valley icon, late on a Friday in May.

Related documents
Perkins: I was 'hacked'
Former HP director Tom Perkins lays out the issues he has with the board.

In a press release issued on May 19, the company said that Perkins "resigned from its board of directors on May 18, 2006, with immediate effect."

State and federal investigators would be looking into whether pretexting occurred because it is sometimes illegal. The Federal Trade Commission has said since at least 1998 that it has the authority to investigate "deceptive acts" including pretexting, and it has filed lawsuits against some data brokers.

So have some state attorneys general, including California's Bill Lockyer, who alleged in a March 2006 lawsuit that a data broker violated state business regulations. (Section 17500 of California's business regulations prohibits anyone from making statements known to be "untrue or misleading," with violations punishable by six months in prison and fines of $2,500.)

The move by HP to investigate its own board members comes at a time when the company has been doing well, posting strong revenue and earnings growth after years of lackluster performance. An HP representative declined to comment on both Keyworth and the Perkins resignation.

After cutting almost 15,000 jobs in a bid to dramatically cut costs, HP has moved to shore up its software business with the acquisition of companies like Mercury Interactive. The company has also announced plans to consolidate its data centers and revamp its enterprise IT strategy, moving away from the poorly understood "Adaptive Enterprise" toward a new concept labeled "next-generation data center architecture."

The early results have been very promising, with HP's stock outperforming competitors' and employee morale apparently on the upswing. Things appear to have gone very differently in the boardroom, however.

HP once counted Perkins as an employee: He did a stint as director of the fabled HP Labs. But Perkins' greatest contribution to Silicon Valley arguably came as a venture capitalist with Kleiner Perkins Caufield & Byers, which bankrolled names such as Sun Microsystems, Google and Genentech.

See more CNET content tagged:
corporate governance, Patricia Dunn, resignation, pretexting, board member

14 comments

Join the conversation!
Add your comment
Send her to Jail
I'm sorry but if you need to spy on someone sit outside there house is fine. But when it comes to personal communcations this is wrong. This lady maybe head of HP or whatever position she is but she is not the NSA or FBI so she should be put in jail
Posted by kyle172 (65 comments )
Reply Link Flag
Madam Chairperson
Madam Chairperson Patricia D., at HP, it appears on current information to hand, has seemingly brought HP into a form of disrepute and breached numerous California State and US Federal laws at the same time, by the hiring of private investigators to knowingly and willingly bypass these rules and regulations, to obtain the information in an illegal illicit manner!

Oh the shame and scandal of it all, especially telling these fibs to SEC, explaining the reason for a corporate director's resignation, and allowing Chris Hurd, to not elaborate the real reasons for Tom Perkins resignation!

Looks like Chris Hurd, will really have to earn his money the hard way from now on , in damage control mode! , perhaps more resignations and additional house cleaning is required at board level as well, that be the question?
Posted by heystoopid (691 comments )
Reply Link Flag
Incredibly sleazy boardroom scandal
If the reports are accurate that Chairwoman Dunn's investigation
relied on identity theft and pretexting to hunt down the leaker,
her investigation was much worse than the leak itself.

If Dunn would use those tactics against her own board of
directors, what tactics were used against the reporters from the
Wall Street Journal and CNET who published the leaks? The SEC,
the FTC and the Department of Justice should investigate this
fully.

Kudos to Tom Perkins for doing the ethical thing by resigning.
Posted by (2 comments )
Reply Link Flag
NBC
Actually Newsweek has an article on this 2 days ago. CNET has learned... a little late. =)

<a class="jive-link-external" href="http://www.msnbc.msn.com/id/14687677/site/newsweek/" target="_newWindow">http://www.msnbc.msn.com/id/14687677/site/newsweek/</a>
Posted by Gasaraki (183 comments )
Reply Link Flag
Actually...
Actually, if cNet hadn't precipitated the entire incident, Newsweek would have had nothing to report.

:-)

mark d.
Posted by markdoiron (1138 comments )
Link Flag
P Dunn: Another Facist from UC Berkley.
Another typical facist liberal. If you don't agree with her, she'll just use every ghestopo tactic to nail you. Personal privacy? What's that? I'm surprised she didn't go after the freedom of the press as well.

Sieg Heil!
Posted by kamwmail-cnet1 (292 comments )
Reply Link Flag
Not Typical
I would think it would be impossible to be a facist liberal, unless we also have atheist Christians.
Posted by thatkelly (8 comments )
Link Flag
UC Berkley
Really, UC at Bezerkley!

JDH
Posted by heritagejd (8 comments )
Link Flag
LOL at CNet...
...apparently, they can't get smart unidentified sources (who uses their home phone for major corporate leaks?).

And then, because their newsroom isn't set up for much of a "hard news" operation beyond creating new Apple-related headlines, they couldn't even manage to profit from the resulting scandal. MSNBC/Newsweek ate their lunch, drank their milk, and took their brownie for later.
Posted by M C (598 comments )
Reply Link Flag
Spying! Oh, horrors!
Tsk, tsk, Patricia. Don't you know the rules?

You can spy on the workers, you can spy on your fellow competitors, you can spy on the government, and you can spy on your customers.

But thou shalt NEVER spy on your fellow board members.

*(Feel free to substitute "screw" for "spy on".)*
Posted by missingamerica (6147 comments )
Reply Link Flag
leaking confidential info is also wrong
Too many people are coming down on HP but completely ignoring the initial offence. What the directors did in leaking confidential corporate info was just as wrong, if not more so. Corporate privacy does not take a backseat to personal privacy. If you violate a confidentiality agreement, you subject yourself to be investigated. Pure and simple.
Posted by Sonicsands (43 comments )
Reply Link Flag
Say what? Corporate privacy outweighs personal privacy?
Wow, that's scary...

So if a corporation that is committing a crime (say, insider trading to use a "least harm" example) suspects you might be telling the FBI or the SEC about it, the corporation should be entitled to hack your phone records, perhaps break into your house, or whatever else it takes (who knows - kidnap your children?) to protect the "corporation", which is really a synonym for the directors, board members and the senior executives?

Ain't it great, we've now got people advocating a system where some should be above the law based upon economic status...
Posted by missingamerica (6147 comments )
Link Flag
 

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot

Discussions

Shared

RSS Feeds

Add headlines from CNET News to your homepage or feedreader.