HP Scandal Goes to Washington

Throughout the monthlong controversy that has engulfed Hewlett-Packard over its investigation into news leaks, company executives have at once sounded contrite and dismayed at what happened but have refused to take responsibility.

That trend continued here Sept. 28 during a daylong hearing before a U.S. House subcommittee looking into methods used by investigators hired by HP to find who was leaking sensitive company information to news media.

It was a sometimes-frustrated Subcommittee on Oversight and Investigations that grilled HP executives—in particular, former board Chairman Patricia Dunn, who initiated the investigation in early 2005 and again earlier this year—and saw a total of 10 other company employees or people hired by HP refuse to testify, instead opting to plead Fifth Amendment protection against self-incrimination.

"What were you thinking?" asked Rep. John Dingell, D-Mich., a member of the parent House Committee on Energy and Commerce, who sat in on the hearing. "Where was management when this investigation was running amok? Where was the board of directors? The cure appears to have been far worse than the disease. Where were the lawyers? None of the lawyers stepped up to their responsibility."

Dunn, who resigned from the board of directors Sept. 22, testified that while she initiated the investigation, she was assured throughout by lawyers and the investigators that the methods used were legal. While dismayed at the results, Dunn refused to take the hit for them.

"I do not accept responsibility for what happened," Dunn said when asked if she believed she was culpable for the mess.

The scandal has continued to snowball since HP first filed documents with the Securities and Exchange Commission in September acknowledging that investigators hired by the Palo Alto, Calif., company used a legally questionable method called pretexting to obtain the telephone records of board members and journalists. Pretexting involves pretending to be someone else to get such records.

Since then, its been learned that investigators also followed board members and considered a plan to plant spies in newsrooms. The investigation has attracted the interest of several governmental bodies, including the SEC and the California attorney generals office.

The controversy has left several careers in its wake—the most recent being 24-year HP veteran Ann Baskins, the companys general counsel, who stepped down the morning of the hearing—and led to the resignations of three board members, including George Keyworth, who was discovered to have been the one leaking information to the press.

But while subcommittee members heard both Dunn and Mark Hurd, HP chairman, president and CEO, apologize for the scandal, both distanced themselves from knowledge of the investigative methods, and the panel was hindered in its attempts to glean details on what happened and who knew what. Among those who refused to testify were Baskins; Kevin Hunsaker, HPs former ethics officer; Anthony Gentilucci, ex-head of global security at the company; and Ronald DeLia, managing director of Security Outsourcing Solutions, the outside company hired by HP to conduct the investigation.

Subcommittee members were skeptical of Dunns claims that she knew few details of how those investigators were operating, pointing to a series of e-mails, memos and PowerPoint slides they produced that seemed to show that Dunn was heavily involved in the details of the operation, named Kona II, after a vacation she took in Hawaii.

One of those documents was a Feb. 7 e-mail from HP security official Vince Nye to Hunsaker questioning the legality and ethical nature of the pretexting. In addition, Fred Adler, HPs computer security investigator, testified that he was troubled by the methods being used and that he urged company executives to stop the practice and that the information obtained from it not be used.

Other documents released during the hearing indicated that Hunsaker and the outside investigators several times told Dunn and Baskins that the methods being used were legal.

"This was a Plumbers operation that would make Richard Nixon blush if he were alive," Dingell said, comparing the scandal to Watergate.

During his testimony, Hurd again apologized for the conduct of the investigation but, like Dunn, said he was unaware of the details until relatively recently. "What began as a proper and serious inquiry of leaks to the press of sensitive company information from within the HP board became a rogue investigation that violated HPs own principles and values," according to Hurds prepared testimony. "There is no excuse for this."

Hurd, who said during a press conference Sept. 22 that he failed to read an 18-page memo in March on the investigation, testified that there were several times he missed opportunities to learn details of the initiative.

"Im the one who is ultimately responsible," Hurd said, adding that HPs founders would have been appalled at what has happened. He also promised that he would continue to seek out those responsible and to find out what really happened. "We will get to the bottom of this," Hurd said, "and it will never happen again."