The criminal case against one of corporate America’s most powerful women came to a sudden end Wednesday as prosecutors dropped all charges against former Hewlett-Packard Co. chairwoman Patricia Dunn.
Authorities said Dunn’s battle with cancer was at least partly responsible for their decision, but legal experts said it also shows California’s evidence against Dunn and her three co-defendants was never very strong.
“At some point the attorney general’s office knew that this case wasn’t going to hold a lot of water,” said James Post, a Boston University professor and expert on corporate governance and business ethics.
The HP boardroom spying scheme erupted into a national scandal after the company disclosed that detectives it hired obtained the private phone records of directors, employees and journalists in an effort to ferret out the source of media leaks.
The tantalizing case of subterfuge and boardroom infighting reached to the highest levels of the world’s largest technology company. It also introduced the world to “pretexting,” a shady tactic in which detectives used other people’s Social Security numbers to fool telephone companies into divulging detailed call logs.
Dunn ordered the investigators to find the source of the leak after a board member gave company information to a reporter. But she said she didn’t know the detectives would go to such extremes.
She resigned last September at the height of the scandal.
The cases against HP’s former ethics chief Kevin Hunsaker and private investigators Ronald DeLia and Matthew DePante all but dissolved Wednesday as well.
Each pleaded no contest to fraudulent wire communications, a misdemeanor. But Santa Clara County Superior Court Judge Ray E. Cunningham did not immediately accept their pleas and said the charges would be dropped in September after they complete 96 hours of community service and make restitution.
All four defendants had initially been charged with felonies, including identity theft and fraud, for their role in the scheme. Those charges potentially carried hefty fines and prison terms.
Prosecutors said Dunn’s health — she’s been undergoing treatment for advanced cervical cancer — played a role in the decision to drop the charges.
“Based on (Dunn’s) level of involvement in the pretexting scheme, and her health condition, (Attorney General Jerry Brown) believed dismissal of her case was appropriate,” said Brown’s spokesman, Nathan Barankin.
The other three defendants appeared to be more “directly and actively involved in the pretexting activities” than Dunn, he said.
While the deal with state prosecutors allows all four defendants to escape jail time, they may not be entirely out of trouble. Federal prosecutors said their investigation of the HP leaks probe continues. They declined further comment.
To date, only one person has been charged by federal authorities in the boardroom spying.
Private investigator Bryan Wagner pleaded guilty to identity theft and conspiracy and agreed to testify for the prosecution. Wagner had also been charged by the state, but those charges were dropped after he struck a deal with federal investigators.
The Securities and Exchange Commission is also investigating whether Palo Alto-based HP violated any disclosure regulations in the way it announced venture capitalist Tom Perkins’ resignation from the board. Perkins resigned in protest upon learning of the spying tactics and eventually went to authorities with details of the investigation after he felt HP did not properly disclose his reasons for leaving.
James Brosnahan, Dunn’s defense lawyer, said he’s confident the Justice Department won’t bring charges against his client. He said Dunn’s reputation has been unfairly tarnished by the case and she’s focusing on her current health problems.
“This has been a terrible time for her,” Brosnahan said. “She’s been pilloried by people and criticized after a resplendent business career. This dismissal is a good opportunity to rethink Pattie Dunn.”
Dunn started her career as a temporary typist at an investment firm and went on to become CEO of fund manager Barclays Global Investors before stepping down in 2002 to battle breast cancer and melanoma.
The attorney general’s office said it was satisfied with the resolution of the case and pointed out that it led to important reforms in the area of corporate governance and privacy protections. Telephone companies are reporting dramatic declines in the amount of pretexting targeting their customers, Barankin said.
“It should be pretty clear that neither the prior attorney general nor this attorney general were looking for prison time here,” he said. “We’re not talking about criminal street gang activity, but it was in our view illegal conduct. And what was important was to have some accountability for people lying to obtain confidential, private information about others.”
Wednesday’s news broke as HP’s shareholders gathered for their annual meeting — their first chance to grill Chief Executive Mark Hurd about the scandal. Hurd said the company was not going to address the criminal case, but that didn’t stop a few shareholders from airing their views on the spying.
“What are you going to do to give us confidence in the board?” one shareholder asked. “Some people see the board as a private country club.”
“No one is proud of what happened last year,” Hurd acknowledged. “We do intend to transform our board the same way we transformed the company, and we need to have a board that you as shareholders can be proud of.”
But stockholders rejected a proposal to let stockholders nominate candidates for the board of directors, a measure HP had opposed.
There also was some confusion early Wednesday about the agreement between prosecutors and the defendants. The attorney general’s office initially said Dunn and the three others had agreed to plead guilty, but the office later said that was inaccurate.
Throughout the investigation, shares of the region’s oldest and biggest technology company remained immune to the scandal, steadily rising through much of last year.
HP’s stock closed up 24 cents to $39.79 in Wednesday trading on the New York Stock Exchange.