Video: Panel grills Dunn, goes easier on Hurd

updated 9/29/2006 9:32:53 AM ET 2006-09-29T13:32:53

A whistleblower tried to stop Hewlett-Packard Co.’s heist of personal phone records seven months before it erupted into a national scandal, according to a document released Thursday.

Vincent Nye, part of a five-man team that oversaw HP’s efforts to plug a boardroom leak, warned the investigation had gone awry in a Feb. 7 e-mail referring to shady tactics that duped phone companies into handing over the calling records of seven company directors, nine journalists and two employees.

“I have serious reservations about what we are doing,” Nye wrote to his boss, Tony Gentilucci, and HP’s chief ethics officer, Kevin Hunsaker. “...It leaves me with the opinion that it is very unethical at the least and probably illegal.”

A congressional panel released the e-mail as part of a nearly eight-hour hearing into HP’s handling of a probe that has also triggered several investigations into whether any laws were broken. HP is the world’s largest technology company.

“This could be a ’smoking-gun’ memo,” said James Post, a Boston University professor specializing in corporate governance and business ethics. “There are red flags being raised all over it.”

The next big question that needs to be answered is whether Nye’s concerns were ever passed along to HP’s leadership, Post said. HP’s now-deposed Chairwoman Patricia Dunn and Chief Executive Officer Mark Hurd have maintained they didn’t learn about the extreme measures that the company’s detectives were deploying until recently.

Nye, a senior investigator for HP’s Boston-based security unit, could help criminal investigators connect the dots as they try to figure out how much HP’s leadership knew about the skullduggery, said Todd Bailey, a business law professor specializing in ethics at Miami University in Ohio.

“As sure as night follows day, the investigators are going to be lining up to talk to this guy,” Bailey predicted.

California Attorney General Bill Lockyer already has said he has enough evidence to bring criminal charges against individuals inside and outside the company. His spokesman, Tom Dresslar, declined to discuss Nye’s e-mail Thursday. “We are going to go wherever the evidence leads us.”

In his e-mail, Nye urged his bosses to abandon deceptive techniques, known as “pretexting,” that included using Social Security numbers under false pretenses. He also wanted HP to discard the information to preserve the company’s reputation.

“I think we need to refocus our strategy and proceed on the high ground course,” Nye wrote.

After Nye’s warning, HP’s management “probably should have taken the bull by the horns,” said Kevin Springer, a former FBI agent who now runs Corporate Resolutions, a consulting firm. “But it looks like they wanted the information so badly that they forgot the downside and the damage it could do to the company’s reputation.”

Both Gentilucci and Hunsaker left HP earlier this week after documents surfaced showing that they approved the pretexting methods

Citing their Fifth Amendment right against self-incrimination, both Gentilucci and Hunsaker refused to answer questions Thursday about their handling of HP’s probe in a brief appearance before the congressional panel.

The scandal also has prompted HP to sever ties with Dunn, who initiated the leak investigation, and its general counsel, Ann Baskins, who walked away Thursday with a severance package awarding her $3.7 million in stock options and other benefits.

Baskins also asserted her Fifth Amendment rights Thursday in her appearance before the congressional panel while Dunn maintained she had been repeatedly reassured by HP’s lawyers about the legality of its detectives’ subterfuge.

“There was no hint that anyone at Hewlett-Packard had concerns (about the tactics). Quite the contrary,” Dunn told Congress.

Nye wasn’t the only HP employee who suspected pretexting might land the company in trouble. Fred Adler, a former FBI agent who is also part of HP’s security team, also sounded alarms the tactics. Adler reiterated his misgivings Thursday in his congressional appearance.

But Nye’s e-mail is the bluntest — and most prescient — warning to surface from inside HP yet. It certainly caught the attention of Rep. Ed Whitfield, the Republican who chaired Thursday’s hearing. Whitfield ended the session by reading Nye’s e-mail and suggesting to Hurd that the investigator should be awarded with a day off.

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