DoJ, SEC investigating merger vote

How more bizarre can the HP-Compaq merger saga get? On Monday, the US Justice

Department and the Federal Securities & Exchange Commission (SEC) announced

they have initiated criminal investigations into allegations that HP CEO Carly

Fiorina and other HP officials may have broken the law in trying to get

shareholders to approve the $24 billion merger with Compaq.

HP acknowledged on Monday that the US Attorney's Office for the Southern

District of New York has asked the company to submit documents on the voting by

two of HP's largest shareholders, Deutsche Bank and Northern Trust. The subpoena

means a criminal investigation has been opened and a grand jury has been called.

The last-minute change by Deutsche Bank is already the subject of a lawsuit

by HP board member Walter Hewlett who claims the company threatened the bank

with taking its business elsewhere should the bank stick to its plant to vote 25

million shares against the merger.

The latest legal actions, which could prove devastating to HP and Fiorina,

are the direct result of the release of a Fiorina voice message to one of her

top lieutenants demanding that he'd do "something extraordinary" to

get Deutsche Bank to change its vote. The message was leaked to the media by an

HP employee with access to servers that store voice messages.

HP spokeswoman Judy Radlinsky said the requests for information do not imply

wrongdoing, and HP is fully cooperating with investigators. HP is also confident

that neither of the legal actions will show HP did anything improper or illegal.

"We never acted improperly. We remain optimistic that we can close the

merger on our current schedule."

If anything, the new cases will elevate the attention Walter Hewlett's

lawsuit will be receiving, which is set to go to trial starting on April 23.

Hewlett has asked the court for protection for "whistle blowers" HP

employees with information or evidence that would prove Hewlett-'s contention

that HP coerced Deutsche Bank and also lied about financial details of the

HP-Compaq merger.

The Judge in the Delaware case, however, refused to shield the identities of

those witnesses from HP lawyers and officials. In addition, should a preliminary

investigation by the Justice Department result in findings of possible

wrong-doing, such discovery could further delay the ability of HP to finalize

the merger with HP. Grand Jury indictments against the company would almost

certainly be devastating to the merger and the once pristine image of the Palo

Alto company.