HP Spied on More Than Phone Calls

Private investigators working for the company tailed HP's own directors, set up phony news sources and even tried installing spyware on the computer of one, according to an internal Feb. 10 report obtained by The Times.

That scope exceeds previous acknowledgments by HP that its investigators used subterfuge to look at the phone records of reporters and employees as part of a probe to find the source of boardroom leaks.

And as the far-reaching nature of HP's probe becomes known, many observers of the iconic Silicon Valley company are beginning to doubt that Hurd was kept in the dark.

"In a real sense, he's the captain of the ship," said James Post, a management professor at Boston University. "There are a set of questions that do need to be answered: What did he know and when did he know it, what guidance did he give and how active was his direction or oversight."

It is not yet clear how fully informed Hurd was about the investigation -- or how diligent he was in pursuing information.

"He may have asked the question, 'Is there anything else I should know?' and gotten the answer 'no,' or he may not have asked the question," Post said. "Either way, the fingers have to be pointing at Hurd in terms of what did he know and when did he know it?"

Hurd, who came to HP last year with a mandate to turn around the flagging company, has remained largely above the two-week-old scandal. Instead, criticism has focused primarily on the actions of Chairwoman Patricia C. Dunn, who ordered the investigation.

Implicating Hurd could cause problems for HP beyond the existing criminal probes, congressional investigation and public relations nightmare. Such a turn could put pressure on HP's stock, which has remained flat throughout the controversy.

HP shares rose 43 cents to $36.78 -- 32 cents above the stock's closing price Sept. 5, the day the scandal broke.

"Wall Street would consider it a disaster if Hurd would have to be taken out of that role," said Tim Bajarin, president of consulting firm Creative Strategies. "I can't believe that would happen. He has done so much to resurrect the company's fortunes and put it back on track."