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HP board cuts its ties with lawyer

Hewlett-Packard's board is said to have ended a crucial advisory relationship with Larry Sonsini, the powerful Silicon Valley lawyer.

Hewlett-Packard's board has ended a crucial advisory relationship with Larry Sonsini, the powerful Silicon Valley lawyer, according to a person with close connections to the board.

The move is the latest repercussion from the company's spying on directors and journalists, which has led to the criminal prosecution of its former chairwoman and a senior company lawyer by California authorities, several federal investigations, $14.5 million in civil fines as well as considerable embarrassment for a company that prided itself on ethical behavior.

After the year's end, Sonsini and the firm he helped build, Wilson Sonsini Goodrich & Rosati, will no longer serve as outside counsel to the board. The law firm will still do legal work for Hewlett-Packard. A company spokesman said yesterday that "Wilson Sonsini will continue to have a relationship with HP."

Sonsini and his firm were not involved in the spying, which began after Patricia Dunn, the HP chairwoman, directed company lawyers and investigators to find the source of board leaks. But he was caught up in the events, and was criticized for failing to prevent the incident from damaging the HP.

HP's search for another lawyer to serve as outside counsel is expected to set off a scramble among Silicon Valley firms. "It's not a big revenue item for a law firm, but being able to say to other clients that 'I give advice to HP,' is a prestige thing," said a lawyer who did not want to be identified because he has done work for the company.

A spokeswoman for the Sonsini firm, Courtney Dorman, said, "There is a lot of ongoing work with HP." The firm handled the transactional work for HP's recent $4.5 billion acquisition of Mercury Interactive, a business software company.

Sonsini, who serves as chairman of the firm he joined in 1966, had no comment. Dorman also said that the firm's chief executive, John V. Roos, had no comment.

Sonsini has served as HP's outside counsel since the mid-1990s and he advised the company during its contentious battle with shareholders over the merger with Compaq. The firm's clients include some of the region's most important companies, among them Apple Computer, Google, Sun Microsystems and Applied Materials, and Sonsini helped take many of them public. He also serves as the chairman of the Regulation, Enforcement and Listing Standards Committee of the New York Stock Exchange and as chairman of its Legal Advisory Committee.

Sonsini has been faulted by some lawyers for not protecting the company after a director, Thomas Perkins, disclosed the practice of pretexting: the use of false identities to obtain the private phone records. HP's detectives used the technique to get records of certain directors and journalists who covered the company.

In May 2006, another director, George A. Keyworth II, was identified as the source of the leak and was asked to resign. He refused to do so, but Perkins resigned, he now says, in anger over the investigation.

After the resignation, Sonsini, in his role as outside counsel, immediately interviewed Perkins. But he did not find that Perkins had resigned because of a disagreement with the company, which would have prompted the board to disclose the circumstances to the Securities and Exchange Commission. That has prompted an SEC investigation.

Perkins also alerted the board to the use of pretexting, calling it illegal. In a response, Sonsini told him that the pretexting was "within legal limits," though that opinion turned out to be based on the advice of the HP lawyer, now facing charges, who in turn had received the opinion from a Boston lawyer sharing an office with one of HP's private investigators.

The Sonsini firm in late August interviewed people involved in the spying, as well as Mark Hurd, the company's chairman and chief executive, and concluded again that nothing illegal had occurred. In early September, the company filed a statement to the SEC disclosing the pretexting and stating that it was "not generally unlawful."

A congressional subcommittee asked Sonsini to testify during its investigation of the spying. He was called to testify alongside Dunn and had to sit in the witness seat for more than five hours, though she got the brunt of the queries. He defended his law firm's work during the hearing and said that he considered pretexting to be unethical and improper.