The HP Saga: Lockyer Lowers the Boom

4 Oct ’06

The moment in the HP saga that many have been expecting has arrived: California AG Bill Lockyer is indicting Patricia Dunn and four others:

In addition to Ms. Dunn, Attorney General Bill Lockyer intends to indict Kevin T. Hunsaker, a former senior lawyer at H.P.; Ronald L. DeLia, a Boston-area private detective; Joseph DePante, owner of Action Research Group, a Melbourne, Fla., information broker; and Bryan Wagner [Ed: AKA “HP Hammer“], a Littleton, Colo., man who is said to have obtained private phone records while working for Mr. DePante. [Ed: CNet reports that it is DePante’s son, Matthew DePante, who has been indicted.

All of those named face four charges: using of false or fraudulent pretenses to obtain confidential information from a public utility, unauthorized access to computer data, identity theft, and conspiracy to commit each of those crimes. All of the charges are felonies.

The triangulation on a Hunsaker and a Dunn indictment without a Baskins indictment is hard to do – both Dunn and Baskins have claimed that underlings were to blame, and one would have thought that if anything, Baskins was more involved than Dunn. Not so, perhaps; Business Week says Hurd and Baskins are not expected to be indicted. Notably, these are state charges; the Feds have yet to speak.

I have to say I’m surprised. From a distance I thought that at most Dunn could be accused of naivete and mismanagement. Perhaps the cruelest aspect of this outcome is in the NYT’s last ‘graph:

Representatives of Ms. Dunn said Tuesday that she would begin six-months of chemotherapy on Friday for recurrent advanced ovarian cancer.

The Journal offers the first recitation of at least one of the likely charges:

It is unclear exactly what charges Mr. Lockyer intends to bring, but one of them will almost certainly involve California Penal Code Section 538.5, which specifically outlaws “executing a scheme or artifice to obtain, from a public utility” customers’ “billing records.” That appears to be exactly what H-P’s investigators did, by making so-called pretexting calls, using false pretenses, to phone companies, in order to obtain the investigative targets’ phone records.

And the California statute makes clear that it’s not only the people who obtain such information who could be criminally liable, but “every person who transmits or causes to be transmitted” the information. That nuance could prove particularly important in prosecutors’ case against Ms. Dunn, who instigated the leak probes in 2005 and 2006 and has acknowledged knowing that personal phone records were scrutinized. She has said she thought the records were obtained legally.

While I’m not familar with the legal background, seeing this charge in black and white does at least give one pause to reflect on the accounts of Larry Sonsini’s apparent advice to HP. From an early WSJ account:

[Sonsini] and two other Wilson Sonsini lawyers said that H-P accurately reflected their findings this week in a filing with the Securities and Exchange Commission.

In that filing, H-P said a board committee investigating the matter was “advised by the committee’s outside counsel that the use of pretexting at the time of the investigation was not generally unlawful (except with respect to financial institutions), but such counsel could not confirm that the techniques” of outside investigators “complied in all respects with applicable law.” Mr. Sonsini declined to elaborate. He also said he wasn’t authorized to disclose the outside companies H-P used in its probe.

I’ll be watching the story with great interest to see whether any local counsel write on the intriguing question of how the advice Wilson Sonsini apparently gave to HP can be reconciled with that charge.

Update: Via Tom Foremski, Business Week has gone deep on Kevin “I shouldn’t have asked” Hunsaker, with a piece that is linked to various emails and memos – which together make for harrowing reading. BW’s summary:

Dozens of pages of internal HP e-mails, memos, and other documents released by congressional investigators on Oct. 2 show that Hunsaker determined the scope of the investigation’s direction and made pivotal decisions that later would come to light and put HP’s reputation on the line (see BusinessWeek.com, 10/3/06, “Memo 1: ‘That person is liable in some sense…,” “Memo 2: ‘I have serious reservations about what we are doing…,” and “Memo 3: ‘This is ‘Don’t Ask, Don’t Tell’…”). The probe ultimately led to Hunsaker’s departure from the company and forced the resignation of Dunn and other high-ranking company officials, including Baskins. It sparked congressional, Justice Dept., and California state investigations. And it has given the corporation a black eye (see BusinessWeek.com, “Controlling the Damage at HP”).

NO COMMENT. How did a lawyer responsible for overseeing HP’s business conduct find himself at the center of a company ethics scandal? Hunsaker appears to have been put in a difficult position, one that required steely corporate ethics mettle. The staff lawyer, part of a 100-person-plus legal team, was under direct orders from the tech giant’s chairwoman and chief counsel, who put him in the questionable position of playing corporate advocate rather than dispassionate compliance advisor.

How indeed. Hunsaker’s counsel clearly has his hands full. Tactic #1 may be to blame Dunn, and tactic #2 to claim that he was ethically bound to do the bidding of his superiors, so far as it was legal to do so, which of course, as well as being excruciatingly ironic, is tautologically troublesome for Mr. Hunsaker:

Michael Pancer, Hunsaker’s lawyer, said he had not examined the hundreds of pages of documents released by House investigators and could not comment in detail for this story. But he said impersonating a phone customer to get telephone numbers—the most controversial tactic used by HP investigators—had been initiated by Dunn back in 2005, when she first began investigating company leaks. “Kevin Hunsaker was not involved in that investigation. He had nothing to do with it,” Pancer said.

POSITIVE FEEDBACK. Pancer said Hunsaker was doing the job that had been assigned by his superiors, and at no time did he sanction or conduct any illegal activity. “A lawyer’s ethical obligation to a client is to do anything legal to get the correct result. It’s the client’s job to say, among all the legal things you could do, there are some things I’d rather you not do,” Pancer said.

The whole BW piece is worth a careful read.

Update: The WSJ focuses on the Wilson Sonsini advice:

Wilson Sonsini’s conclusions differed markedly from Mr. Lockyer’s. In a presentation to H-P’s board in August, the firm essentially exonerated Ms. Dunn from wrongdoing, finding she “reasonably relied on repeated assurances of legality by HP legal.” The Wilson Sonsini report said that, at the time of the investigations, no laws specifically barred people from using false pretenses to obtain others’ phone records.

Update: One account, that I now can’t locate, raises the question of whether the pretexted companies were “public utilities”, an element of one charge. However, Bob Anderson, California chief deputy attorney for legal affairs, is reported by CNet to have specifically rejected any suggestion that the law is ambiguous.

Update: the triangulation on Dunn and Baskins may actually be quite easy – CNet reports that Baskins is cooperating with authorities.

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