Dunn to Step Down as HP Chairman

Updated: In addition to Patricia Dunn, board member George Keyworth, the source of one of the media leaks that sparked the internal investigation and ensuing public scandal, has resigned.

Hewlett-Packard board Chairman Patricia Dunn, who has been at the center of scandal surrounding an internal company investigation into media leaks, will step down from her position in January 2007, HP said on Sept. 12.

Mark Hurd, CEO and president, will assume the chairmanship during the Jan. 17, 2007, board of directors meeting. Dunn will stay on as a board director, HP said in its statement.

In addition to Dunns stepping down as chairman, longtime board member George Keyworth II, who has been identified as the source of media leaks that led to an aggressive internal investigation that resulted in the current scandal, announced on Sept. 12 that he will resign immediately.

Dunn has been at the center of a scandal that started when the tactics the Palo Alto, Calif., computer maker used during an internal HP investigation became public. The company had sought to find the source of leaks detailing board of directors meetings and other company activities to reporters, who later used the information in news stories.

On Sept. 8, an HP spokesperson told eWEEK that Dunn intended to stay unless asked to leave by the board of directors.

The companys statement did not mention whether Dunn stepped down voluntarily or had been asked to leave. Dunn did admit that some of the actions that were taken against board members and reporters were "inappropriate."

"The recent events that have taken place follow an important investigation that was required after the board sought to resolve the persistent disclosure of confidential information from within its ranks," Dunn said in the companys statement.

"Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques," Dunns statement added.

To find the source of the media leaks, Dunn employed both internal and external groups to use a method called pretexting, which is a process that obtains an individuals personal data by pretending to be that person, HP said in a Sept. 6 filing with the U.S. Securities and Exchange Commission.

/zimages/4/28571.gifClick here to read how to protect against pretexting.

Pretexting can be used to find information such as telephone records. In the case of HP, that information was used to find the source of the leaks. The investigation also tapped into the private communications of nine reporters, including writers for the Wall Street Journal and CNETs News.com, according to reports by the two publications.

The company has said that the type of pretexting it used to find the source of the leaks was lawful. /zimages/4/146520.jpg

Charles King, principal analyst of Pund-IT in Hayward, Calif., said that Dunns resignation was not unexpected but also appears to be a cosmetic move to please the public and the government.

"The companys strategy seems to be shaping up along the lines of: We had every right to track down the leaks, and hired investigators who unfortunately used inappropriate methods of which we werent aware. Sorry about that. Wont happen again. Could everybody please go home now?" King said.

King added that removing Dunn totally from the board would seem like an admission of guilt.

"Dunns remaining on the board preserves, for now, anyway, gives the notion that HP believed it was acting appropriately but was undermined by overly enthusiastic investigators outside the company," King said.

The internal investigation ultimately showed that Keyworth had been the person sharing information about the board meetings with reporters. The internal investigation also led to board member Thomas Perkins requesting his own investigation because he believed that his private conversations may have been compromised.

The internal leak probe first came to light when the Sept. 6 HP filing with the SEC was reported. Perkins claim, which was included in that filing, helped bring the scandal to light.

In his own statement, Keyworth said he had long talked to reporters both on the record and off the record during his time with the company. HP said that while it was standard to have Keyworth speak to reporters, a conversation with a CNET reporter had not been "vetted" through proper channels.

"The invasion of my privacy and that of others was ill-conceived and inconsistent with HPs values," Keyworth, a board member since 1986, said his statement.

"I acknowledge that I was a source for a CNET article that appeared in January 2006. I was frequently asked by HP corporate communications officials to speak with reporters—both on the record and on background—in an effort to provide the perspective of a longstanding board member with continuity over much of the companys history," Keyworth said.

The U.S. Attorneys Office for the Northern District of California has contacted HP about its use of pretexting. In addition, the California District Attorneys Office has made an informal request for information about how the HP investigation had been handled, a company spokesperson said.

In a statement, Hurd said the company needs to be held to higher ethical standards.

"I am taking action to ensure that inappropriate investigative techniques will not be employed again," Hurd said his statement. "They have no place in HP."

In addition to its other announcements on Sept. 12, HP said Richard Hackborn has been designated as lead independent director. Hackborn, a former chairman of the company and an employee for more than 30 years, will start his new position in January 2007, the company said.

Chris Preimesberger contributed to this story.

Editors Note: This story was updated to include additional information and comments from Pund-ITs Charles King.

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