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HP's way out

September 09, 2006

IN A WEEK FULL OF CORPORATE LAYOFFS and executive shuffles, Hewlett-Packard Co. should have been able to announce one little departure from its board of directors Tuesday without stirring up a media frenzy. But that's not where the new "HP Way" leads.

The company nailed itself to the front pages with a series of revelations about an internal investigation that relied on snooping into the phone records of board members and reporters. HP's public shaming continued long after the media lost interest in Ford Motor Co. and Viacom Inc. replacing their chief executives and Intel Corp. announcing plans to lay off thousands. And it's not over yet.

The high-tech pioneer's troubles started when it couldn't stop confidential information from leaking out of its board room. Board Chairwoman Patricia Dunn ordered an investigation, and when the results came back, the directors asked board member George Keyworth to resign. He refused and, on Tuesday, HP disclosed that Keyworth would not be renominated.

The scandal erupted when venture capitalist Thomas Perkins, who had already resigned from the board in protest, blew the whistle on the method used to finger Keyworth: HP's private investigators obtained the phone records by contacting phone companies and pretending to be the directors themselves. Such "pretexting" was used to dig up records for several reporters' phone lines as well.

Astoundingly, HP's legal team, including Larry Sonsini -- one of Silicon Valley's best-known lawyers -- saw no problem with obtaining sensitive personal records under false pretenses. The Federal Trade Commission's position on these methods, articulated in February, is clear: "Pretexting is against the law." Specifically, legal experts say, it's against federal and state laws on deceptive trade practices, identity theft and, potentially, computer crime.

California Atty. Gen. Bill Lockyer opined Thursday that laws had, in fact, been broken. But the question now is whether anyone at the company will be charged, or just the unidentified contractor who did the dirty work. An HP spokesman says the company instructed its hired guns to use legal means, but that sounds like a dodge.

By shining a spotlight on the thriving black market for sensitive personal information, the HP imbroglio may prod Gov. Arnold Schwarzenegger to sign a recently passed bill to rein in pretexting. The measure, by state Sen. Joe Simitian (D-Palo Alto), would ban pretexting for phone records and bar anyone other than law-enforcement agents from buying or selling such records without the written consent of the subscriber. The bill would send an overdue message to P.I.s and companies such as HP: Phone records are personal and private, so if you want them, you'd better seek a subpoena.

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