Saturday, September 23, 2006

H-P's Mea Culpas

Hewlett-Packard CEO Mark Hurd held a press briefing -- no media questions were allowed so it was not very enlightening -- in which he described his role in the company's internal investigation that involved "pretexting" to obtain private data on journalists, directors, and officers.  In addition to apologizing for H-P's conduct,  Hurd's eight minute statement (audio available here) describes his peripheral involvement in the investigation and admits that he was asleep at the switch when he received but did not review a report of the process.  By not allowing questions, Hurd avoided having his story challenged, a situation that is less likely to prevail at the House Energy and Commerce Subcommittee hearing on September 28 at which he will testify.  In addition, Patricia Dunn will step down immediately as chairwoman of the board, rather than waiting until January 2007 as previously announced.  She has clearly become scapegoat number one, but others will likely follow in that role. (AP story here

Hurd's statement contains an interesting admission regarding the first investigation of the internal investigation, in May and June when issues were raised about the propriety of the company's conduct.  Hurd states that a law firm performed that investigation, although he does not identify it, and then goes on to describe the recent investigation by Morgan, Lewis & Bockius as "more comprehensive."  What was wrong with the earlier investigation?  Were limitations placed on the law firm that conducted it to limit the scope of the inquiry, similar to the restrictions placed on Vinson & Elkins back in 2001 when it undertook an "investigation" of the allegations of wrongdoing at Enron leveled by Sherron Watkins?  In an e-mail exchange between Larry Sonsini and former H-P board member Tom Perkins, Sonsini says that outside counsel conducted an investigation and gave the internal investigation that included "pretexting" a clean bill of health.  Was that investigation done by Wilson Sonsini, H-P's long-time outside counsel?  If Morgan Lewis can discover problems in only two weeks, why didn't the other law firm ferret them out?  If Wilson Sonsini did that first investigation, then Sonsini's assertion to Perkins might be a bit disingenuous by referring to a law firm that was in fact his own.

Hurd states that all the facts related to the leak investigation may never be known because of the extensive use of outside parties.  Hurd emphasized that the leaks from H-P that trigger this entire mess were a violation of the company's ethics policy, but that cannot justify unleashing an investigation apparently subject to such little oversight that H-P says it may never know what happened. (ph)

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