HP to pay $14.5M to settle civil suit

NEW YORK (CNNMoney.com) -- Hewlett-Packard said Thursday it will pay $14.5 million as part of an agreement to settle civil claims related to its controversial leak investigation with the California attorney general's office.

The settlement also calls for a sweeping set of governance reforms at HP, including widening the oversight of the company's chief ethics officer and appointing an independent watchdog director who will monitor the board for potential ethical and legal violations.

California Attorney General Bill Lockyer won't pursue civil claims against HP as part of the settlement announced Thursday.

Despite a messy scandal, HP shares are trading at a six-year high.

A civil complaint filed by the attorney general's office alleged that HP violated California laws related to privacy and identity theft when its investigators accessed the phone records of board members and journalists by pretending to be them - a practice known as "pretexting."

As part of the agreement, HP was not found liable for those claims.

"We are pleased to settle this matter with the Attorney General and are committed to ensuring that HP regains its standing as a global leader in corporate ethics and responsibility," HP CEO Mark Hurd said in a statement.

Of HP's payment, $13.5 million will be used to establish a fund that helps California state prosecutors investigate violations of privacy rights and intellectual property rights.

California Attorney General Bill Lockyer has aggressively pursued the corporate spying case. His office has filed felony charges against former HP (Charts) Chairman Patricia Dunn, former chief ethics officer Kevin Hunsaker and three private investigators involved in the company's controversial leak probe.

All five defendants have pleaded not guilty.

But Lockyer won't pursue civil claims against HP or any of its current and former directors and employees under the settlement.

"Fortunately, Hewlett-Packard is not Enron. I commend the firm for cooperating instead of stonewalling, for taking instead of shirking responsibility, and for working with my office to expeditiously craft a creative resolution," Lockyer said in a statement.

HP, one of the nation's largest tech companies, disclosed in September that it spied on board members and journalists during an investigation into boardroom leaks, unleashing a scandal that grabbed headlines from Silicon Valley to Wall Street and led to the ouster of Dunn and several other HP employees tied to the scheme.

Board member George Keyworth, who eventually was fingered as the source of the leaks, and Thomas Perkins - another board member - also departed the company in protest against the spying tactics.

While the Palo Alto, Calif.-based computer products maker has come under fire for its poor corporate ethics, its stock has held up well - largely since Hurd has avoided criminal charges.

Hurd has said that he received a report that outlined the methods HP investigators used to locate the source of the leak but that he didn't read it.

Shares of HP, which has reclaimed the top spot in the PC market from rival Dell (Charts), have climbed about 41 percent this year amid aggressive cost-cutting efforts and healthy earnings.

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