Video: Panel grills Dunn, goes easier on Hurd news services
updated 9/28/2006 8:06:38 PM ET 2006-09-29T00:06:38

Lawmakers diving into the spying scandal at Hewlett-Packard Co. came up with a seemingly damaging e-mail: An HP investigator had warned higher-ups that the company’s boardroom leak probe was possibly illegal and likely threatened the computer maker’s reputation.

Even so, in a hearing that lasted all of Thursday, the House Energy and Commerce Committee got few answers about how the warning went unheeded as HP investigators impersonated people to obtain their phone records, snooped through trash and surveilled reporters and directors.

Former Chairwoman Patricia Dunn, who resigned from HP last week, told the panel that she had been assured that phone records had been obtained lawfully from public sources. Current Chairman and CEO Mark Hurd said that he should have detected that inappropriate methods were being used, but that he failed to do so.

Perhaps the committee’s best chances to find out how the Silicon Valley icon descended into tawdry tactics were squandered when 10 people — including at least two recipients of the e-mail warning — asserted their Fifth Amendment right against self-incrimination, refusing to answer questions. That group included General Counsel Ann Baskins, who resigned Thursday shortly before she was expected to testify.

Lawmakers on the committee expressed outrage that HP, the nation’s 11th biggest company by revenue, would find itself in such an ethical quandary.

“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.”

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. Democratic Rep. John Dingell of Michigan summoned the ghosts of Watergate.

“We have before us witnesses from Hewlett-Packard to discuss a plumbers operation that would make Richard Nixon blush were he still alive,” Dingell said.

Rep. Ed Whitfield, R-Ky., chairman of the committee’s investigative panel, demanded to know why, with many high-ranking HP executives and attorneys involved in the probe, “No one had the good sense to say ‘Stop.”’

Committee members asserted that there was actually one such stop sign: a February e-mail from HP senior investigator Vince Nye to his superiors.

“I have serious reservations about what we are doing,” Nye wrote. “I am requesting that we cease this phone-number gathering method immediately and discount any of its information.”

Kevin T. Hunsaker, until recently the company’s chief ethics officer, and Anthony R. Gentilucci, who left as HP’s global investigations unit in Boston, would have been expected to explain their reaction to the memo had they not taken the Fifth on Thursday. The committee also had sought testimony from Ronald DeLia, the operator of the detective firm hired by HP.

Besides the inquiry by the House committee, 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. And the Securities and Exchange Commission is pursuing a civil inquiry.

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 testified he and his firm were “not involved in the design or conduct of the investigations.”

HP shares have been largely unaffected during the probe; investors are most concerned about the fate of Hurd, who is credited with turning around the company’s performance in his 18 months as CEO. The shares gained 1.6 percent to close at $35.97 on the New York Stock Exchange.

“The biggest question facing HP right now is whether Mark Hurd comes out of these hearings with his credibility intact,” said James Post, a Boston University professor specializing in corporate governance. “And his credibility is going to hang on how good a job he does handling all these tough questions. I doubt if he has ever been through something like this before.”

Hurd apologized for the investigatory tactics but denied having direct knowledge of the probe’s methods.

“If Bill Hewlett and Dave Packard were alive today, they’d be appalled,” he said, referring to the company’s revered founders. He pledged to “redefine our company.”

Earlier, Dunn blamed bad advice from others in the company, including Baskins. “I deeply regret that so many people, including me, were let down by this reliance” on such advice, Dunn told the panel.

Dunn stumbled at turns and corrected herself when asked how much she knew of the shady tactics, including when she learned that the investigators had used pretexting. But while saying she was unaware of the details, she repeatedly defended the probe as necessary to stem serious leaks of confidential information.

“I dispute having ever understood or being told that the fraudulent use of identity was ever a part of this investigation,” Dunn insisted.

She noted that she was pretexted as well; the probe targeted every member of the board, HP investigator Fred Adler testified. Pretexting also was used in previous investigations by the company.

Elsewhere, Verizon Wireless filed a lawsuit Thursday against 20 unnamed individuals who allegedly used deceptive means to obtain telephone records on behalf of HP.

In documents filed in federal district court in Trenton, N.J., Verizon said a total of 20 individuals engaged as data brokers were hired directly or indirectly by HP to investigate leaks of confidential information from the company’s board of directors.

The lawsuit said the defendants used “fraud, trickery and deceit” to access call records from Verizon customer service centers and through online customer accounts.

The Associated Press and Reuters contributed to this report.


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