HP scandal claims fourth scalp

WASHINGTON - United States lawmakers said Hewlett-Packard relied on scant legal backing to obtain private telephone records in a probe of boardroom leaks, as three former executives refused to testify on Thursday about the company investigation.

The scandal enveloping the computer and printer maker claimed its fourth senior company official on Thursday as HP General Counsel Ann Baskins resigned hours before she was to appear at the House Energy and Commerce subcommittee hearing.

Baskins, two other former company executives and a string of hired investigators invoked their right not to testify.

Lawmakers scolded former HP chairman Patricia Dunn and the remaining officials for allowing investigators to pose as board members, employees and journalists to obtain their phone records in a practice known as pretexting.

"It would appear that Hewlett-Packard at the very highest levels relied upon a document prepared by a law clerk hired by the private investigator saying that pretexting is legal," said Representative Edward Whitfield, chairman of the subcommittee.

Dunn said she received assurances from Ronald DeLia of Security Outsourcing Solutions Inc that the information was obtained legally and that she did not fully grasp how it was obtained until June 2006.

"I trusted... and I understand why that might seem strange today knowing what I know now. But that was my state of mind at the time," Dunn said.

Dunn said she was referred by HP's Chief Financial Officer Bob Wayman to the head of HP global security who in turn led her to DeLia. An HP spokesman has denied Wayman's involvement.

DeLia exercised his right not to testify to avoid self-incrimination as did Anthony Gentilucci, former head of global security for HP, and HP ethics officer Kevin Hunsaker.

HP eventually identified director George Keyworth as the source of the leaks. He resigned effective September 12. after refusing a board request in May that he leave.

The company is now under investigation by the US Justice Department, California's attorney general and the Securities and Exchange Commission.

Lawmakers called for immediate action on legislation to ban the practice of fraudulently posing as a person to obtain telephone records, but it's not clear the House and Senate can agree on the details before recessing at the end of this week to campaign for November elections.

Committee members harshly criticized Dunn and HP's current board for failing to intervene or be fully briefed on the investigated they requested.

"Why weren't you paying attention at briefings and why didn't you read the reports that raised red flags," asked Representative John Dingell, the top Democrat on the full committee. "Where was board leadership and responsibility?"

However, there were warnings the investigation methods were improper when HP revived its leak search in early 2006.

In a February 7 email, HP security official Vince Nye told Gentilucci he had "serious reservations" about the methods DeLia used, calling them "very unethical at the least and probably illegal."

Nye urged that the "phone number gathering method" stop.

Other documents released at the hearing show Dunn and Baskins were reassured several times by Hunsaker and hired investigators that pretexting was legal.

HP CEO Hurd said in his written testimony that he attended parts of meetings where the investigation was discussed and approved the content of an email with false information to be sent to a reporter to try to learn the source of leaks.

HP's investigation went so far as to furtively track board members and journalists.

"To go to this level to try to find out who might be leaking something, there's just no excuse for it, there just isn't," said Representative Greg Walden, an Oregon Republican.

Under Hurd, who joined HP in April 2005, the company has enjoyed a rebound in its performance. HP shares are up 23 per cent since the start of the year and were up 25 cents US$35.64 ($54.97) in afternoon trading on the New York Stock Exchange.

- REUTERS