The HP Saga: I Know Nothing – NOTHING!

28 Sep ’06

The latest gyrations in the HP saga are beginning to remind me of Sergeant Schultz, the great Hogan’s Heroes character who would always profess his ignorance of prisoner shenanigans he would rather have ignored; no one in the HP saga now seems to really know anything about anything, though everyone seems to have been involved in all of it – language is becoming decidedly ambiguous, and everything seems to have been referred to other people for their action. How comforting for HP shareholders that this carnival of dissembling seems to be reaching a fevered pitch just as the House Energy and Commerce Committee’s subcommittee on oversight and investigations prepares to make a spectacle of the entire mess.

The WSJ’s account presents a menu of cross examination opportunities for subcommittee members, much of it from former chair Patricia Dunn’s and not as yet former CEO Mark Hurd’s witness testimony released yesterday (presumably to get the mystery of what witnesses will say out of the way so that the cameras can focus instead on on the oratory of subcommittee members; Kedrosky’s take here):

  • Dunn says she was informed that using Ronald DeLia constituted “normal processes” in pursuing investigations at HP, and that she was told he had worked for H-P for “eight or nine years.”

  • Dunn said she learned by late spring in 2005 that private phone records were being accessed. But she says she got the “clear impression” from Mr. DeLia that such phone records “could be obtained from publicly available sources in a legal and appropriate manner.
  • Dunn said she discussed the investigation with Hurd and other directors, though she didn’t spell out whether they were told that private phone records were obtained. Hurd said “although the board was informed that an investigation had started, they were not told the operational details.” Hurd apologized for what he characterized as a “rogue operation.” He castigated investigators for being “so focused on finding the source of the leaks that they lost sight of the values of this company.”
  • Dunn says she turned to Robert Wayman, H-P’s CFO, after she decided to pursue the matter of board leaks. She said he referred her to Kevin Huska, a staff member responsible for security, who referred her to Mr. DeLia. “It was my assumption that Mr. Wayman, having ultimate authority over all the resources involved in security and investigations, as well as having been one of the directors who felt the most strongly about the importance of controlling leaks from the board, had provided authorization for whatever work was undertaken,” she said. Michael Moeller, an H-P spokesman, said “any assumption about Bob Wayman’s involvement made by Ms. Dunn was nothing more than that, an assumption.”
  • Dunn said that “neither Mr. Hurd nor I designed or implemented the investigative techniques.” She said she knew that some of the probe targets were followed, but said she had no problem with such “old-fashioned detective work.” She and Hurd have said they were aware of a gambit that involved sending a bogus email to a reporter as part of the probe. Dunn said she made special efforts to ascertain the tactic’s legality, before referring it to Mr. Hurd for “the final decision.” Hurd said he approved the content of the message, but doesn’t recall whether he knew the misinformation plot involved the use of tracer software that could show where the email was forwarded.
  • One of the persons suspected of obtaining phone records, Bryan Wagner, of Littleton, Colo., said in an interview yesterday that he didn’t know if he obtained any phone records in connection with the H-P leak probe because his employer-Action Research Group-never identified its clients. “They do not provide me any details on anything,” he said. “I pretty much always assume that I am looking for people who have taken cars and aren’t paying.” He added that he believed most of the clients are “bounty hunters and bondsmen.” Mr. Wagner said he hadn’t yet decided if he will answer questions before the House committee, but will appear. He also declined to comment about an article in The Wall Street Journal yesterday that he had told an investigator in Denver last week that he had destroyed his computer with a hammer and discarded it after learning that he might get caught up in the investigation of the H-P leak case. “I just don’t have my computer anymore,” he said, declining to answer any questions about it.

How delightful. Now that Mr. Wagner has shown the way, will there be a run on hammers at the Lowe’s nearest HP’s offices? And what of these gyrations? Well, I can practically hear the subcommittee members sharpening their knives. Hmm – there’s one now (again, from the WSJ):

Rep. Ed Whitfield, the Kentucky Republican who chairs the House Energy and Commerce Committee’s subcommittee on investigations, said he intends to grill Mr. Hurd on the matter, and whether the H-P CEO also knew such tactics were potentially illegal. “We’re going to ask him a lot of questions and get the facts out,” Mr. Whitfield said in an interview.

And from the NYT:

“These folks still in the company need to come clean,” said Greg Walden, the Oregon Republican who is vice chairman of the panel’s investigations and oversight subcommittee, which is convening the hearing.

We now know that two HP employees – sadly, both apparently too junior to have enforced any moral compass in the process – do seem to have raised alarms about the legality or morality of HP’s investigative techniques. From a CNet report yesterday:

In a Feb. 7 e-mail, HP security official Vincent Nye told the company’s head of security and a lawyer supervising a probe into unauthorized leaks that he had “serious reservations” about what the company was doing.

Nye said that his understanding of the methods HP was using to obtain telephone records using false pretenses “leaves me with the opinion that it is very unethical at the least and probably illegal,” he said in the e-mail, which was turned over to the House Energy and Commerce committee and seen by CNET News.com.

“If it is not illegal, then it is leaving HP in a position of (sic) that could damage our reputation or worse,” Nye said in the e-mail. “I am requesting that we cease this phone number gathering method immediately and discount any of its information.”

The e-mail appears to have been sent to former HP security head Anthony Gentilucci and Kevin Hunsaker, a former HP senior counsel. Both employees left HP as of Tuesday, the company said.

Nye is at least the second HP employee to raise a red flag about the technique.

On Jan. 28, Fred Adler, a member of HP’s IT security team, was asked if investigators might be able to obtain text messages for former board member Tom Perkins. Adler responded the same day that the company could not legally obtain the records “unless we either pay the bill or get consent.” Adler’s e-mail was reported last week by The Wall Street Journal.

Mr. Nye’s willingness to raise his hand makes a mockery, of course, of all of the dissembling and all of the machinations that seem now to have been so carefully engineered to give the actors a veneer [Ed: a 'pretext', perhaps?] of legality and propriety. This is beginning to feel like the right moment for some skillful cross-examination. As the NYT puts it:

Saying that the practices, even if legal, “could damage our reputation or worse,” the investigator, Vince Nye, said in an e-mail message, “I think we need to refocus our strategy and proceed on the high-ground course.” Mr. Nye worked in the company’s global security unit.

Why that advice was not followed — and apparently did not reach the top levels of Hewlett-Packard’s leadership — is expected to be a central theme of Thursday’s hearing.

Finally, the NYT also notes that the Committee has subpoenaed five new witnesses:

The five are Bryan Wagner of Littleton, Colo.; Darren Brost of Austin, Tex.; Charles Kelly of CAS Agency in Villa Rica, Ga.; Cassandra Selvage of Eye in the Sky Investigations in Dade City, Fla.; and Valerie Preston of InSearchOf Inc., in Cooper City, Fla. Congressional staff members said they did not know if any would answer questions.

The five are believed to be at the end of a long investigative chain that stretched from Hewlett-Packard’s headquarters in Palo Alto, Calif., to its own investigators in Boston, through Mr. DeLia’s firm, Security Outsourcing Solutions, and on to Action Research Group, a data broker in Melbourne, Fla., that is said to have hired the actual pretexters.

The hearing will begin with a panel of witnesses who are expected to invoke their Fifth Amendment right against self-incrimination.

Beginning with the panel that takes the fifth will no doubt add just the right touch of tawdry disrespectability to the entire charade just in time for the arrival of HP witnesses:

A second panel will include company officials who were involved in the investigation, including Ms. Dunn; Ms. Baskins, the general counsel; and Fred Adler, a security investigator, as well as Larry W. Sonsini, the company’s outside counsel. That panel will also include Joseph DePante, the owner of Action Research Group, the Florida investigative firm.

A third session will include only Mr. Hurd, at his request, in part because he wanted his role to seen as separate from other H.P. officials.

I’ll admit to being a little puzzled as why the Committee would grant Hurd that indugence.

Update: HP’s General Counsel, Ann Baskins, has unexpectedly resigned and will apparently join the ranks of those taking the fifth. The WSJ has a copy of the separation agreement that has been filed. It notes about US$5M in vested and to be accelerated unvested options.

And is Representative Ed Markey reading my blog? From WaPo’s early report of this morning’s events at the committee hearings:

“I am very concerned that HP may be suffering from Sergeant Schultz Syndrome. Some in a position of authority may now be saying ‘I heard nothing, I saw nothing, I knew nothing,’ ” Rep. Ed Markey (D-Mass.) said. “That’s their defense. It is not believable. Where were the lawyers when all of this was happening?”

Update: WSJ Law Blog is at the hearings, peppering us with updates.

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