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HP's Dunn Details Role in Scandal

In testimony prepared for a congressional hearing, the former chairwoman says she was aware of the tactics but was not hands-on.

September 28, 2006|Jim Puzzanghera | Times Staff Writer

WASHINGTON — Former Hewlett-Packard Co. Chairwoman Patricia C. Dunn said the company's spying scandal mushroomed beyond her "worst nightmare," but insisted that it was her duty to track down boardroom leaks, according to testimony prepared for a congressional hearing to be held today.

In her most expansive account of the scandal that led to her resignation last week, Dunn reiterated that she did not have a hands-on role in the probe. Nor, Dunn said, was she aware that a potentially illegal ruse known as pretexting was used by company investigators to obtain phone records of board members and reporters.

The internal investigation, which Dunn said she initiated but did not direct, also involved physical surveillance and an attempt to plant "tracing" software in a reporter's e-mail.

"I did not find it objectionable that suspected leakers might be followed to see if they were meeting with reporters," Dunn said, adding that much of the investigation "struck me as old-fashioned detective work."

In 33 pages of written testimony released by a House subcommittee, Dunn said she was not concerned that anything illegal was taking place because HP lawyers were overseeing the investigation.

She also warned against limiting the power of directors in overreaction to the scandal.

"That certain steps taken during the investigation went well beyond what was appropriate does not undermine the importance of the board's mission in this matter," Dunn said. "Let me state clearly that it would be another in a string of tragedies here if it were to be concluded that companies do not have the right to protect themselves against disclosure violations."

Dunn is among 14 witnesses scheduled to appear before a House Energy and Commerce subcommittee probing the spying scandal at the Palo Alto technology company. The California attorney general's office and the FBI are pursuing criminal investigations, and the Securities and Exchange Commission also is conducting an investigation.

HP Chief Executive Mark V. Hurd was more contrite in his 10 pages of testimony, reiterating the public apology he issued at a news conference Friday.

"It's an age-old story," Hurd said. "The end came to justify the means. The investigation team became so focused on finding the source of the leaks that they lost sight of the values of this company."

Despite the controversy, one HP director said Wednesday that the board stood by Hurd.

"There have been absolutely no discussions about Mark's resignation," Robert Ryan told Reuters. "We just made stupid mistakes. It wasn't intentional."

But Hurd and other witnesses are expected to be grilled by subcommittee members outraged by HP's tactics.

The lawmakers are focused on pretexting, a practice the subcommittee began investigating in February. The House of Representatives unanimously passed legislation this year that would clarify existing law to make the practice a crime. The Senate is considering similar legislation, and House lawmakers are expected to use today's hearing, and another Friday that includes phone company executives, to press for passage this year.

Two HP employees involved in the probe, ethics counsel Kevin Hunsaker and global investigations manager Anthony Gentilucci, have resigned. Dunn said that Hunsaker supervised the leak investigation this year, reporting to Ann Baskins, HP's general counsel. All are among today's witnesses.

The investigation was largely conducted by two outside firms: Security Outsourcing Inc. of Needham, Mass., and Action Research Group Inc. of Melbourne, Fla. The heads of both companies also will testify.

Dunn said she didn't hire the private investigators who conducted the probe. They were already under contract to HP, and because of that she assumed their work was authorized by Chief Financial Officer Bob Wayman.

The committee said it issued subpoenas for five private investigators, working as subcontractors for Action Research Group, who conducted pretexting for the HP investigation: Darren Brost of Austin, Texas; Charles Kelly of CAS Agency in Villa Rica, Ga.; Valerie Preston of InSearchOf Inc. in Cooper City, Fla.; Cassandra Selvage of Eye in the Sky Investigations in Dade City, Fla.; and Bryan Wagner of Littleton, Colo.

Dunn said in her testimony that Ronald DeLia, managing director of Security Outsourcing, had done investigative work for HP for years, and she had been confident he would be "a reliable and trustworthy agent."

"I was fully convinced that HP would never engage in anything illegal, and the privacy issues related to our directors were balanced in my mind against their eagerness to get to the bottom of the problem," she said.


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