The HP Saga: Dunn is Indeed Done; Hunsaker Sacked

22 Sep ’06

The WSJ and NYT have now issued their first pieces (AP here) after the news flashes that followed HP CEO Hurd’s press conference today (audio). HP Chair Patricia Dunn is resigning as Chair and from the Board effective immediately, at the request of the Board. Hurd will take her place. The NYT reports, with tongue-in-cheek, I hope, that it “was not clear from Mr. Hurd’s remarks if the departure of Ms. Dunn from the board was meant to indicate that she is considered culpable for the failings of the investigation” – is it ever, in press conference land? See also Alex Simpson’s Corporate and Securities Law Blog, particularly his part the twenty-eighth (oy!), with detailed point-by-point notes of the press conference (including more new facts about the surveillance operations).

As for himself, Hurd asserts only a passing familiarity with the leak investigations, and no awareness of the pretexting:

The chief executive admitted he attended a “brief” board meeting last year where the probe was discussed. He said it was a discussion about the first phase of the investigation, which yielded no results.

Mr. Hurd said he and others in the management chain weren’t privy to a second phase of the investigation, begun earlier this year in which “pretexting” and other practices were used. Mr. Hurd said he knew investigators planned to send a fake email to a reporter but said he doesn’t recall approving use of tracing technology.

In the first positive development in some time, at least from a PR standpoint, Hurd announced that HP has hired Bart M. Schwartz, a former U.S. prosecutor, “as counsel, to perform a forward-looking and independent review of investigative methods that were used.” (The NYT reports only that HP has “retained a law firm to do a comprehensive investigation to explain the chain of events that led to the improper conduct”, leaving one to wonder why, when it worked so damnably poorly the first time, under Wilson Sonsini’s watch.) I’ll assume for the time being that the Schwartz choice is grounded in crisis management advice that HP engage someone with a reputation for tough-mindedness and independence, even if it means blood on the floor, and that Schwartz fits that bill.

In the press conference Hurd also apologized to the journalists that were pretexted. My sense is that a public display of contrition will, together with swift action to investigate and act, actually be one of the more important elements of the HP communications strategy over the next few days. I would guess that the California AG will, in an unclear case of HP liability, be reluctant to prosecute if the company has visibly suffered, taken responsibility, and committed to corrective measures. (One of the notable elements of the conference was that Morgan, Lewis & Bockius, the outside counsel retained to manage the investigation, indeed seems to be working intensely towards that end – a positive sign.)

What’s needed now is that swift action. Who directed the pretexting, and who knew it was being done?

Update: The NYT is reporting that two senior employees, unnamed as of yet, have been fired.

Update: NYT has updated its story and says the departures are Kevin Hunsaker, HP’s senior counsel and director of ethics, and Anthony Gentilucci, the Boston-based manager of global investigations for HP. And in what must be the sourest note for HP today, it looks like the Democrats are now involved:

The burgeoning scandal at Hewlett-Packard reflects a broader problem that Congress must tackle through new laws, the Democratic co-chairman of the Congressional Privacy Caucus said Friday.

“Clearly the problem of corporations using private detectives and information brokers to obtain illicit access to telephone records and other personal information is not limited to Hewlett-Packard,” Rep. Edward Markey, a veteran Massachusetts politician, said in a statement. “Congress needs to be asking exactly how widespread this practice is, and whether companies are skirting or even violating the law by prying into the details of people’s telephone records or other personal information.”

The statement came the week before a U.S. House of Representatives oversight and investigations panel plans to grill Hewlett-Packard executives and outside investigators about the company’s probe into journalists, employees and board members suspected of involvement in media leaks.

Markey called for enactment of new consumer privacy laws and a bill–sponsored, not surprisingly, by himself–designed to outlaw the sale of Social Security numbers.

The WSJ reports on the departures thusly:

A person familiar with the matter said Mr. Gentilucci and Mr. Hunsaker “are in the process of leaving the company.” Ms. Baskins relied on the legal opinions provided her by Mr. Hunsaker, a lawyer, this person said. Mr. Gentilucci did not return calls seeking comment. Mr. Hunsaker could not be reached.

“In the process of leaving the company”? Escorted to the door window, perhaps, and not yet having hit the ground.

The obvious question is whether HP’s general counsel will be next.

Update: The Recorder raises the question of whether new outside counsel ought to be reporting to Hurd, now that he may be under a cloud.

Update: Hurd’s press conference bought him about 12 hours of respite, by my reckoning. WaPo is already running a piece questioning why, in light of what is known now about his conduct, he has been given additional duties in the shake-up.

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