Hewlett-Packard Paid $325,000 To Trace Board Leaks

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Hewlett-Packard Co. paid private investigators more than $325,000 to spy on directors and reporters in a probe that may have used illegal tactics and eventually cost Chairwoman Patricia Dunn her job.

Surveillance, including a sting operation and digging through trash, was the most expensive item, costing $83,600 over five months, according to an invoice from Security Outsourcing Solutions Inc. that was supplied by Hewlett-Packard and released late yesterday by the U.S. House Energy and Commerce Committee.

Mrs. Dunn authorized the probe that led investigators to spy on directors, two employees, and nine reporters as they searched for the source of boardroom leaks. At one point, Mrs. Dunn considered using lie detectors, the documents show. Mrs. Dunn, General Counsel Ann Baskins, the company’s director of ethics, and the global security chief all resigned last month for their part in what Hewlett-Packard Chief Executive Officer Mark Hurd called a “rogue investigation.”

“Cost of catching leaks: $325,000. Cost to company’s reputation: priceless,” a longtime Silicon Valley researcher and associate professor at Stanford University, Paul Saffo, said in an interview. “Everyone has gotten so hung up on the legality of this they’ve forgotten the ethics.”

Palo Alto, California-based Hewlett-Packard, the world’s second-largest personal computer maker, paid more than $51,000 to have personal phone records obtained as part of the probe, according to a May 2 invoice submitted by Ronald DeLia of Security Outsourcing, a Boston-based firm that oversaw a network of investigators working to gather information on the company’s behalf. The probe, dubbed Kona II, ran from December 2005 through April, according to Mr. DeLia’s bill, which totaled $325,641.65.

Hewlett-Packard acknowledged on September 6 that investigators used fake identities to gain access to call records, a tactic called pretexting that may be illegal. California Attorney General Bill Lockyer said he is considering whether to indict Hewlett-Packard executives and outside contractors over the probe.

Mr. Hurd said he may have recalled hearing in a July 22, 2005 meeting that phone records were being obtained off the Web, according to an interview he had with lawyers for Wilson Sonsini Goodrich & Rosati on August 25 as part of their review of the probe. Mr. Hurd said he was not aware that pretexting was being used to obtain phone records, according to a three-page summary of the Hurd interview.

The House committee released 700 pages related to the investigation after Mrs. Dunn, Mr. Hurd, outside attorney Larry Sonsini and internal security chief Fred Adler spent about seven hours fielding attacks from lawmakers who chastised the PC maker for its handling of the probe. Representative John Dingell called it a “case study in deceit, dishonesty, improper behavior” and an example of “gross stupidity.”

Mr. Hurd, who has admitted not giving the probe the oversight it deserved, told committee members last week that Hewlett-Packard terminated its contract with Security Outsourcing after relying on the firm for about eight years to help with investigations.

Among the charges from Security Outsourcing was the line item: “Multiple Surv. And Sting Activity Palo Alto, Piedmont, SF, LA, CA & Denver, CO (Note: includes surveillance & trash recon of all areas).”

Background checks on board members, their relatives and reporters from media outlets including the Wall Street Journal and Cnet.com cost a further $66,688, according to the bill.

Mr. DeLia also charged $37,535 to “locate, review and catalog over 10,000 print and Internet media articles.”

Hewlett-Packard paid more than $9,600 for work related to recovering a laptop computer owned by board member George Keyworth, who resigned in September after acknowledging he was the source of some leaks.

Mr. Keyworth’s laptop was stolen while he was on vacation in Italy, and Mr. DeLia, in a February 3 e-mail to Hewlett-Packard’s internal security team, said he had spoken with local police to ask for help in trying to recover the machine.

“We will also contact the local criminal element and inform then there is a reward, no questions asked, for the return of the laptop,” Mr. DeLia said in his message to Kevin Hunsaker, Hewlett-Packard’s director of ethics, and Anthony Gentilucci, then global security chief. Mr. Hunsaker and Mr. Gentilucci led the Kona II investigation.

At the urging of director Tom Perkins, whose complaints about the methods of investigation forced Hewlett-Packard to go public, Mrs. Dunn considered using lie detectors. She commissioned a report on polygraphs, which concluded it was inappropriate to use such tactics, according to a memo from the company’s law firm dated August 21, which cited an interview with Mrs. Dunn.

Mr. Perkins then backed off, according to Mrs. Dunn’s statement to the lawyers. Mrs. Dunn didn’t tell the rest of the board that lie detectors had been considered and rejected.

Hewlett-Packard declined to comment, said spokesman Mike Moeller.


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