HP chairman resigns, CEO confirms knowledge of probe

CEO Mark Hurd takes over chairman's post as Patricia Dunn resigns from a board grappling with scandal. HP's boardroom drama

Ina Fried
Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
6 min read
PALO ALTO, Calif.--Hoping to slow a growing storm of criticism over a controversial leak probe, Hewlett-Packard on Friday said that Patricia Dunn would step down immediately as chairman and board member, to be replaced by CEO Mark Hurd.

However, Hurd also confirmed on Friday that he knew about several key phases of the investigation and attended meetings at which the investigation was discussed. Hurd said he was e-mailed a report summarizing the investigation but that he did not read it.

"I could have, and I should have," he said. At the same time, Hurd said the investigation was necessary. "I feel strongly that leaks hurt the company's reputation and its ability to operate effectively. It was the responsibility of the HP chairman to pursue the leak situation."

Attorney Michael J. Holston, a partner at the law firm Morgan, Lewis & Bockius, said the report "outlined the source of the leaking and outlined the investigative techniques involved--including pretexting." In addition to being sent to Hurd, it was also sent to Dunn and HP General Counsel Ann Baskins, according to Holston.

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The press conference, in which questions from the press were not permitted, comes ahead of a congressional committee hearing next week. Meanwhile, the California attorney general and federal authorities are pursuing criminal investigations.

On Friday, Hurd gave more details on his knowledge of the probe into the boardroom leaks and said he hired law firm Morgan Lewis earlier this month to investigate the matter.

"I believe we have now a substantial set of the facts," Hurd said. "I will also say that some of the findings that Morgan Lewis has uncovered are very disturbing to me."

Holston detailed the involvement of several other HP employees in the leak probe, including Baskins. And he confirmed many elements of the investigation's time line, which had two phases, as well as the outside firms, including investigation firm Security Outsourcing Solutions, that were involved.

Morgan Lewis has collected more than 1 million pages of documents, according to Holston. He said the firm has reviewed "many of those pages." "We are committed to reviewing the remaining documents as fast as we are able," he said.

He promised a further inquiry into the matter. "Our investigation is not complete. There is still more work to be done," he said.

Hurd emphasized that it's a complicated situation, that keeps getting more complex.

"As of today, we still do not have all of the facts," Hurd said. "I also cannot guarantee that we will ever be able to obtain all of the information regarding this investigation. This is due to its complexity, the number of people involved, with many of them outside the company."

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HP's CEO Mark Hurd speaks Complete audio of HP's CEO Mark Hurd on his company spying on reporters and HP officials to stop media leaks.

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Lawyer details HP investigation Morgan Lewis lawyer Mike Holston outlines what his company's investigation has learned.

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HP said that the investigation had two phases. The first phase, dubbed Kona I, stretched from early 2005 to late summer 2005 and the second, called Kona II, began in January 2006, when CNET News.com published a story that reported on an HP board meeting, Holston said.

But there is still some confusion around the time line of HP's investigation.

Kona I may have concluded by late summer 2005, but HP apparently kept looking for leaks. In January 2006, HP's investigative contractor, Security Outsourcing Solutions, had an investigator keep an eye on an offsite board meeting to "determine if any journalists were seen at or around the site," said Holston.

He also said after News.com wrote its Jan. 23 article detailing that board meeting, the leak hunt resumed. But government investigators have told two News.com reporters that their personal phone records were accessed the week before that story was published.

In fact, News.com reporter Tom Krazit was told his phone records were accessed on Jan. 20, the same day he contacted Robert Sherbin, HP's vice president of external communications, for comment in advance of the story. Sherbin told News.com he had been asked to alert other HP officials of potential leaks, but did not remember who he contacted about his discussion with Krazit. Reporter Dawn Kawamoto was told by government investigators that her phone records were first accessed on Jan. 17.

Holston said the first investigation was inconclusive, while the second probe did uncover the source of the leaks. "During the course of Kona II, certain members of the investigation team provided assurances that the techniques being used in the investigation were legal," Holston said.

"The investigation included tactics that ranged from the review of HP's internal e-mails and instant messages, to the physical surveillance of an HP board member and at least one journalist, to the pretexting of telephone call information of board members, HP employees and journalists," he said.

While these tactics had already become public, Holston also disclosed for the first time on Friday that investigators may have gone through people's trash in February 2006, though the company would not say whose trash may have been accessed.

In the second phase of its investigation, HP also sent CNET News.com reporter Dawn Kawamoto a bogus e-mail tip that included an electronic tracer designed to reveal the IP address of anyone who received a forwarded copy of the e-mail.

Although the journalist corresponded with the fake informant, "the investigation team never received any confirmation that the tracer was activated," Holston said.

Hurd said that he approved the sending of a bogus tip, but did not approve the use of the tracking technology.

"I was asked to and did approve the naming convention that was used in the content of the e-mail," Hurd said. "I do not recall seeing, nor do I recall approving, the use of tracer technology." Holston said the Morgan Lewis inquiry also found no evidence that Hurd was asked to approve use of the tracer.

On other surveillance methods, Holston said the Morgan Lewis investigation does not show any indication that computer keystrokes were tracked. Also, while a PowerPoint presentation detailing the investigation does discuss potential "undercover operations" at the San Francisco offices of the Wall Street Journal and CNET Networks, there is nothing that shows this actually occurred, he said.

As for the physical surveillance, Holston said investigators staked out a January board meeting to see if any journalists were nearby. Also, an investigator followed an HP board member on a trip to a conference in Colorado in early 2006 and observed him, his spouse, and possibly other family members at his California home.

In February 2006, investigators surveilled a journalist at her residence, Holston said. In all cases the surveillance was done by SOS, Holston said.

During the investigation, HP or its investigators also obtained Social Security numbers of four reporters, three board members and one employee, Holston said. The identifying numbers, typically considered confidential, were used for the purpose of getting their phone records.

Holston also said that HP is "not currently aware of any investigation into leaks continuing after May 18, 2006."

Dunn isn't the only person to leave HP. Kevin Hunsaker, senior counsel and HP ethics director, and Anthony Gentilucci, an HP global investigations manager in Boston, are in the process of leaving the company, according to sources familiar with the matter. Those departures may not be the last related to the matter, a source said.

Board member Richard Hackborn was named lead independent director. In addition, HP has hired Bart Schwartz, a former U.S. prosecutor, as counsel to perform a "forward-looking and independent" review of HP's investigative methods and the company's standard of business conduct processes, Hurd said. "This will ensure we have the appropriate level of rigor and discipline so we can be assured that this type of situation can never happen again," he said.

Despite acknowledging some involvement, Hurd pledged to further investigate the matter and attempt to "take full accountability" to set things right.

"Our job is to fix this and get back to the job of running a business," he said. (Click here for a PDF transcript of Hurd's remarks.)