HP to pay 14.5 million to settle board-leak case

By Duncan Martell

SAN FRANCISCO: Hewlett-Packard Co. said on Thursday it would pay California $14.5 million to settle a civil case related to board-leak investigations that led to the resignation of Chairman Patricia Dunn.

HP said that under the agreement, filed in Santa Clara County Superior Court, it would also put measures in place to ensure its internal investigations comply with state law.

During the company's internal probes, investigators impersonated HP board members, employees and journalists to obtain their private telephone records. The probes, which came to light in September, sullied the reputation of a Silicon Valley stalwart that prided itself on integrity.

California Attorney General Bill Lockyer filed criminal charges against Dunn, who resigned on Sept. 22, and four others in October because of tactics used in HP's efforts in 2005 and 2006 to find the source of media leaks.

"The Hewlett-Packard incident has helped shine a national spotlight on a major privacy protection problem," Lockyer said. "Fortunately, Hewlett-Packard is not Enron. I commend the firm for cooperating instead of stonewalling, for taking instead of shirking responsibility."

HP said that $13.5 million of the total amount would be used to create a Privacy and Piracy Fund to help California prosecutors in investigating consumer privacy and piracy violations.

"HP puts the matter behind itself for a number that will give the AG's office a nice PR punch and some money for this investigative fund," said William Keane, a partner in the San Francisco office of Farella Braun + Martel. "But it's not a big number for HP."

Another $650,000 would be used to pay statutory damages and $350,000 would reimburse the Attorney General's office for its investigation.

HP also said there was no finding of liability against it as part of the settlement. The California attorney general will not pursue civil claims against the company or against its current and former directors, officers and employees, HP said.

Tom Dresslar, a spokesman for the California attorney general, said that at the moment, his office has no plans to bring a criminal action against HP.

Dunn, along with four other defendants named face four felony charges: conspiracy; fraudulent use of wire, radio or television transmissions; taking, copying and using computer data; and using personal identifying information without authorization. Each count could bring a maximum of three years in prison.

Also charged were former HP ethics officer Kevin Hunsaker, who has left HP, and investigators Bryan Wagner, Ronald Delia and Matthew DePante of information supplier Action Research Group.

"Given the individual criminal charges and given the big splash of the civil settlement, I would be surprised to see the company have to contend with any criminal charges in the future," Keane said.

HP in October named Jon Hoak chief ethics and compliance officer. He reports to Chief Executive Mark Hurd and will oversee HP's adherence to its standards of business conduct. Hoak had been general counsel for NCR Corp., also Hurd's former employer, from 1993 to May of this year.

Hurd has called the efforts a "rogue" investigation and has said he would get to the bottom of the leak issue and ensure the questionable practices used would not be used again.

Still pending, however, are HP investigations by the U.S. Attorney for California, the U.S. Congress, the U.S. Federal Communications Commission, and the U.S. Securities and Exchange Commission, HP spokeswoman Emma Wischhusen said.

Shares of HP fell 28 cents to close at $39.86.