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Hewlett-Packard CEO Mark Hurd resigns under cloud

Investigation of a sexual harassment claim by an outside contractor finds Hurd violated HP's conduct standards, the company says.

August 07, 2010|David Sarno and Walter Hamilton

Mark V. Hurd, the chief executive of Hewlett-Packard Co. who is credited with rebuilding the technology giant into the world's largest computer maker, resigned abruptly Friday following accusations of sexual harassment and falsifying expense reports.

HP said an internal investigation found "numerous instances" in which Hurd submitted inaccurate expense reports meant to conceal Hurd's "close, personal relationship" with an independent contractor. The inquiry was launched after the unidentified contractor claimed she had been sexually harassed by Hurd.

The company's general counsel, Michael Holston, said Hurd's behavior reflected a "profound lack of judgment" and violated HP's standards of business conduct. He stressed, however, that the company found no evidence of sexual harassment.

Hurd, 53, was contrite in a statement announcing his departure. "I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP," he said.

Hurd will receive a severance package of $12.2 million, according to documents filed with the Securities and Exchange Commission.

Hurd's resignation stunned Wall Street. In the wake of the announcement, HP's stock plunged nearly 10% in after-hours trading, shearing nearly $10 billion off the company's market value.

It was not the first time Hurd had been touched by scandal.

After becoming chief executive in 2005, Hurd led HP through a turbulent period during which executives were accused of arranging surveillance of the company's board members and journalists in an effort to identify the source of repeated leaks to the press.

In a practice known as pretexting, private investigators hired by the company impersonated reporters and board members to obtain private telephone records.

Those methods spurred legal action against board Chairwoman Patricia Dunn, who the company said at the time spearheaded the efforts to ferret out the leaks. Dunn was later cleared of the charge.

But critics also accused Hurd of playing a role in the HP "spying scandal," and some of them now say his involvement may have portended future troubles.

"I'm not surprised that Mark Hurd has been snared in a scandal that has cost him his job," said Anthony Bianco, who wrote a book chronicling the spy scandal called "The Big Lie."

According to Bianco, a longtime journalist and author of several books on corporate malfeasance, Hurd's handling of the leaks investigation early in his tenure showed that he was a man "of questionable ethical character of the sort that would be a problem for HP again."

Michelle Reinglass, a Laguna Hills attorney who mediates employment law cases, said CEOs and management-level employees are setting themselves up for trouble when they begin relationships with employees or third-party contractors.

"What happened with Mr. Hurd is one of those 'What were you thinking?' situations," Reinglass said. "It's so patently obvious. Anyone who's using company resources for their own personal relationships, they're usually going to get caught and it's usually going to end badly."

According to recent public records, Hurd is married with two children.

Though relatively little-known as the time he was hired at HP, Hurd fashioned a reputation as an operational whiz and relentless cost-cutter with a zeal for big mergers, pulling off acquisitions of technology companies Electronic Data Systems, 3Com and cellphone maker Palm Inc. during his tenure.

Hurd is broadly credited with restoring HP's luster following the tumultuous tenure of his predecessor, Carly Fiorina, now a U.S. Senate candidate. Fiorina was ousted after repeated clashes with HP's board, many stemming from her push for the company's controversial purchase of Compaq Computer in 2002.

But under Hurd, the company regained its focus and competed vigorously to take back its lead as a maker of consumer and business computer systems, analysts said.

"The fact is he guided the company into a very strong position," said Michael Holt, an analyst at Morningstar Inc. "Much stronger than when it was dependent on printers and ink."

Hurd achieved his results in part by slashing thousands of jobs at a company that once was celebrated for its paternalistic culture. He had earlier overseen aggressive cost cutting while the chief executive of NCR Corp.

"As I've cut costs, I've seen some employees crying [when they've been laid off] and even brought to their knees," Hurd told the Wall Street Journal in 2005 shortly before joining HP. "It's painful — but as CEO these days, you face relentless pressure from shareholders" for strong profits.

Cathie Lesjak, the company's chief financial officer, will act as interim chief executive until a permanent successor is chosen, the company said.

david.sarno@latimes.com

walter.hamilton@latimes.com

Times staff writer Stuart Pfeifer contributed to this report.

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