HP charges dismissed: An end to a ghoulish prosecution
Thanks be to a state superior court judge, former California Attorney General Bill Lockyer's ghoulish felony prosecution of former Hewlett Packard (HPQ) Chairman Patricia Dunn and three others for their involvement in HP's telephone pretexting scandal ended yesterday -- not with a bang, but a whimper.

Judge Ray Cunningham dismissed all charges against Dunn outright, and will dismiss all charges against her three co-defendants in about six months, after they do some community service. Though each had been charged with four state-law felonies, none will ultimately stand convicted of anything. The three whose charges were not dismissed outright -- a senior HP lawyer and two outside investigators -- were required only to plead "no contest" to a single misdemeanor, though the misdemeanor will ultimately be dismissed too. (A "no contest" plea is an admission of nothing that nevertheless permits the state to treat you as if you were guilty.) To be clear, none of the four will be left with any criminal conviction stemming from this prosecution. On the other hand, each still faces potential exposure in an on-going federal criminal inquiry arising from the same events.

These were the charges that arose from HP's outlandishly overblown, but legally murky attempt to ascertain which director on its board had been leaking inside corporate information to the press, in violation of HP policy and, possibly, the director's fiduciary duties to the corporation. In the course of the inquiry, HP's outside investigators obtained private phone records of directors and journalists by pretending to be the people in question.

There had never been any doubt that Dunn had acted in good faith throughout the inquiry, having received advice from two senior HP attorneys -- then HP general counsel Ann Baskins, who was never criminally charged, and senior counsel Kevin Hunsaker, who was -- that the investigatory techniques were lawful. Nevertheless, Lockyer, who was then running for state treasurer, evidently theorized that ignorance of the law was no defense, which is, indeed, the rule for some white-collar offenses. Still, the prosecution would have been wildly inappropriate on these facts even had Dunn not been suffering from late-stage ovarian cancer, as she was.

California had no law specifically aimed at telephone "pretexting," as the practice has come to be called, until September 29, 2006, long after the events at issue had occurred. When that law finally was enacted, it was a misdemeanor. Nevertheless,Lockyer charged each defendant with four felonies under preexisting laws that he theorized could be applied to this situation, though none ever previously had been. (For an earlier post questioning the appropriateness of these charges, see here.) In light of yesterday's consensual resolution, we'll never know if any of his theories would have panned out.

The recently enacted California misdemeanor that does prohibit "pretexting" was signed into law, of course, just two days after Dunn herself testified before a Congressional subcommittee exploring HP's runaway leak probe. Bravely, Dunn had chosen to testify rather than invoke her Fifth Amendment right against self-incrimination, the way Hunsaker, Baskins, and all the others in Lockyer's gun sights had.(Dunn's attorneys at Morrison & Foerster were roundly second-guessed in the press for "letting" her do so -- mainly by attorneys who were seeking free advertising for their own criminal practices -- but the decision was, of course, ultimately Dunn's.)

Federal law on pretexting during the period in question was also murky, so the defendants await with trepidation the outcome of the ongoing federal inquiry, which appears very much alive. In a recent New Yorker article, journalist James Stewart said that pretexting could "obviously" constitute federal wire or mail fraud. When a journalist of Stewart's caliber says something like that, it may well mean that he has spoken on background to the federal prosecutors, and that they are, indeed, proceeding on that theory. Still, I disagree with Stewart and/or his sources; a mail or wire fraud on these facts would be unique, pioneering, abusive, and highly suspect as a matter of law. Under federal precedents, deceit alone does not constitute "fraud," which usually requires that the defendant intend to realize some personal pecuniary gain by depriving someone of money or property. (Though there are exceptions -- see this article on "honest services" fraud for a general discussion -- none seem to apply here.) In this case the victims were being deprived only of their privacy rights, and the intent of the defendants (though ill-considered and betraying terrible judgment) was not to enrich themselves but to catch an alleged wrongdoer. Even if the conduct should be made illegal, people should not be prosecuted retroactively for conduct that wasn't clearly designated as criminal at the time they engaged in it.


The Hewlett-Packard pretexting case certainly has culprits. Neither I nor lawyers at the Department of Justice are among them. The defendants in this case broke the laws of our state and, in the process, violated constitutionally-protected privacy rights. Combined, the prosecutors in this case possessed more than seven decades of experience. They evaluated the evidence and determined they could win a unanimous jury verdict on the charges filed.

HP officials' legal investigation of the conduct essentially consisted of consulting a lawyer in Massachusetts connected to a defendant and surfing the Web. That lack of due diligence is matched only by some pundits' lack of credibility. The Stanford professor frequently quoted as a critic of the charges didn?t even know phone companies are utilities in California, a key facet of the case.

This case was not cobbled together. It rested on a solid foundation of evidence and state laws. I had a duty to pursue justice, regardless of the status or special circumstances of any particular defendant. If I had wanted to take the politically correct action, I would have ignored the evidence and dropped the case. I'm proud I didn't place election-year comfort above duty.

Bill Lockyer
California State Treasurer
Posted by Roger Parloff 7:17 AM 12 Comments comment | Add a Comment

Your conclusion, though it may be correct, pains me. I am aghast at the thought that it is perfectly legal for someone could call one of my vendors, claim to be me, and receive proprietary information about me or my activities (being aghast doesn't make it illegal, however).

I would think that the best you could say about Dunn is that she acted incompetently (truly there are other and better ways of handling a boardroom controversy). It is certainly clear she showed a marked lack of personal and professional ethics, no matter from whom she received her advice. Should, for example, you advise me that I am on firm legal ground in having reporters and other parties only directly involved followed and their phone records obtained, I would like to believe that I would instinctively decline to take that course of action.
Posted By Peter Varhol, Nashua, NH : 9:32 AM  

I am glad this is over for MS Dunn and now she needs rest to fight her illness.
I feel she did no wrong or knew at the time this was going on..

Good luck

Roland M.

So, how do you spell Parloff � P-A-R-L-O-F-F? Wow, got it right. Now I am calling AT&T so I can obtain your phone records just because I want to. It�s OK � my attorney said it was OK. I have an advance degree but I don�t have to think because my attorney said it was OK.

And, because I have a bad headache, it is OK for me to speed down Page Mill Road. I will use that excuse when Palo Alto�s finest pulls me over.

My point is that Dunn knew or should have known what she was doing was a crime. The fact that her attorney gave her bad advice doesn�t negate her responsibility. While I feel for her illness, it is not an excuse for committing a felony. This was not a witch-hunt, it was a legitimate prosecution. Feel for the victims which include each and every one of us who has been a victim of identity theft.

I do thank Bill Lockyer for putting the fear of god into every CEO. The fear that you will be prosecuted and put on public display if you commit a crime or fudge your accounting reports. CEO�s don�t fear fines, they can be easily paid. But to lead them away in handcuffs in front of media frenzy will make them think twice.
Posted By Michael Huntsinger, Palo Alto, CA : 11:08 AM  

As a former HP employee of 32 plus years I was saddened by this whole affair. It seems that the Company Dave and Bill founded has been replaced by something a bit more pedestrian. Mr. Hurd should rename the company if for no other reason than separate the HP of then from the HP of now.
Posted By Greg Ervice, San Diego, CA : 11:38 AM  

Thise scandal was evolved around a big mouth director who thought he can do and say whatever he wants because he thought he was above everybody as well as he has a buddy who has a lot of dirty money to spare.

At the same time your government spies on your everyday if they think that you are a potential suspect. There is no just thing as privacy in this country. What are you going to do?
Posted By Kam Thi, Pearland, TX : 12:54 PM  

I retired from HP. During my last years there we had to take MANDATORY ethics classes. If I recall, it was something about morals, lying, stealing,cheating,
... What was that other one....HHMMM...
Oh yea... respect for your fellow employees. These oinkers led by the Witch and her band of little harpees wouldn't know morals or ethics if it slapped them in the face. They would probably melt.
I was rewarded for lying and cheating. The more I fudged the numbers the better my reviews. Upper managment mde me and most everyone else want to puke!!
Posted By Alan Jackson Kansas City Ms : 1:13 PM  

I find the sentiments of the article disturbing on many levels.

1. As a Chairman, Dunn was responsible for the actions of the company, in particular the ones she personally authorized. One of the reasons (at least in theory) people in her positions are paid ridiculous salaries is that they assume higher risks when making decisions. If she can get away with mistakes just because "someone else said/did it" it seems like a very cushy job where you get the praise and not the blame. Why the big bucks then?

2. Bringing up Dunn's sickness into this is absolutely ridiculous. By that logic, terminally ill people can go on a killing rampage and everything will be OK, because you know, they are sick. This country prosecutes, hounds and deports terminally ill people all the time, I am sure a rich executive can handle reality better than others.

3. The overall tone here implies that pretexting was OK because a) no clear laws existed and b) there was no "personal gain." While it can be argued that no laws at the moment covered the issue, it is frightening that Mr. Parloff does not think pretexting should be an illegal act. I like Parloff's logic on that. It means if I send a virus to Mr. Parloff through deceit and it opens his computer for everyone in the world to see, it will be just fine, since I will not gain anything personally. Of course, the many hackers in the world will be able to pull the private information off that computer. By Parloff's definitions, I am off the hook, because as he states, the victim (him in this case) is only deprived of privacy rights. Of course the hackers that used information for their own benefit are still criminals, but that doesn't matter to me. I only provided for a way to cause damage, not damage itself. Brilliant.
Posted By Mikhail Voroniouk, Chandler, Arizona : 1:17 PM  

Perhaps its time now for the courts to look into the behavior of Lockyer. (Far be it from the possibility that the Democrat controlled legislature ever would).
It is not legal to use the position of State Attorney General or any other public attorney's office for personal gain through malicious prosecution.

It is quite clear that Lockyer used this case to promote his name recognition and assist in his campaign to remain on the State payroll. It is also quite clear now and was from the start that there was no legal basis for his sword rattling prosecution.

Its a shame that Californians and California businesses must endure this type of cheap self promotion from offices and officers that should be serving the public, not their own self aggrandizement.
Posted By Stan Gage, Portola Valley CA : 1:43 PM  

Mr. Parloff, your assessment STINKS to high heaven. It's always like that, let some underling at HP do/act in the "same manner" Ms Dunn conducted herself, and WE KNOW that minion would not get the charges dropped, even on their "death bed!!!" Hell, that low-wage earner or middle manager could not afford all the "high-prize-wheel-and-deal-with-the-judge-in-his-chambers!!!

Lastly, re-read the comment from Mr. Mike Huntsinger - it APTLY describes how a number of us "minions with advanced degrees from very good schools" (as in Yale and Duke) feel!! ;-)
Posted By Kwame, San Jose, CA : 2:22 PM  

Roger your writing is very good, but your logic STINKS!! If you're anon-practicing attorney it's o.k. But please don't try to be one (an attorney) - KEEP YOUR DAY JOB!!
Posted By Joe Appiah, Attorney, Wash.D.C. : 2:28 PM  

A "ghoulish prosecution?" What law school did you go to? Or you're one of those "attorney-wanna-be" Editors? Shame on you for your trashy analysis!! Your ilk tend to always support what MONEY and "Social Pedigree" can cavort, and leverage to its benefit. I bet you, as someone commented earlier, if Ms. Dunn was a lowly HP employee, AND/OR an African American or Hispanic on their deathbed, no amount of hue and cry from their "public defender" would have had the "charges dropped!!!" How sad, but I don't blame you. Even the HP CEO coasted by Congress like droplets of oil on Teflon. No wonder white collar crime amongst executives are on the rise. Yet you label the action of the prosecuter with the gall to levy the appropriate scrutiny "ghoulish?" Give us a break!!
Posted By Kojo Osei, Silver Spring, MD : 5:33 PM  

This case should provide ample material for future studies in business ethics. The boardroom leak being investigated was surely seen as a serious compromise to facets of the company's business operations and needed to be resolved. This imperative eventually degraded to "the dark side" when the investigators began their "dirty tricks". In their eyes, the end must have clearly justified their means.

In practice, it might be interesting to learn how this leak could have been discovered and closed without having to resort to such "dirty tricks" or related unethical behavior.

It is interesting to note that it was members of the media who were the target of these "dirty tricks". They protested loud and hard and probably had much to do with blowing this case up well beyond the limits of what it legitimately deserved. It is ironic indeed that some members of the media apply their own brand of "dirty tricks" whenever needed to get their next big story with near immunity and without recourse. So, their means to such ends, whatever those may be, is justified in the name of a free press? Had they been held to the same level of ethics that Dunn and her cohorts are being criticized for breaching, they might not have exploited the leak that caused this whole fracas in the first place.
Posted By Stan Walker, Santa Fe, NM : 4:28 PM  

Or feel free to send a letter to the editor about this story. Top of page

About this blog
This blog is about legal issues that matter to business people, and it's geared for nonlawyers and lawyers alike. Roger Parloff is Fortune magazine's senior editor (legal affairs). He practiced law for five years in Manhattan before becoming a full-time journalist. To join in the discussion or suggest topics, please email rparloff@fortunemail.com.