California AG may indict within a week in HP case
CEO Hurd to succeed Dunn as chair; Dunn to leave post after scandal; director Keyworth resigns.
NEW YORK (CNNMoney.com) -- California Attorney General Bill Lockyer may file criminal charges within a week in his investigation of tactics used by Hewlett-Packard Co. in an inquiry into boardroom leaks, a spokesman told Reuters on Wednesday.
"It could happen in a week," said Tom Dresslar, a spokesman for Lockyer. However, "We're not going to confine ourselves to a specific timeline for any charges."
Lockyer said in a televised interview on Tuesday that his office has enough evidence to file charges against HP officials and outside contractors.
Hewlett-Packard (Charts) shook up its board Tuesday as it dealt with a growing investigation of its own probe of boardroom leaks, but experts said the computer maker that helped make Silicon Valley into a world-class technology powerhouse has yet to put the scandal behind it.
HP Chairwoman Patricia Dunn is taking the fall for the boardroom scandal: she will leave her post after the company's Jan. 18 board meeting, the company said. She will be succeeded by CEO Mark Hurd, who took that post 17 months ago and has helped the company win fans on Wall Street.
Dunn will stay on as a director, and board member Richard Hackborn will serve as lead independent director starting in January, the company said.
Longtime board member George Keyworth, who was discovered to be the source of company leaks, resigned from the board immediately, HP also declared Tuesday.
"The invasion of my privacy and that of others was ill-conceived and inconsistent with HP's values," Keyworth said in a statement. He also admitted to being the source of a company leak in January of this year.
HP, the storied technology firm founded in 1939 by William Hewlett and David Packard, has been enveloped in a scandal ever since it disclosed last week that an outside investigator may have used illegal methods to spy on some directors and reporters as the company probed leaks of sensitive corporate information.
On Wednesday, The Wall Street Journal said one of the outside investigators HP used is Ronald R. DeLia of a small Boston firm called Security Outsourcing Solutions. HP declined to comment on the matter.
HP had asked Keyworth to resign in May after the investigation fingered him as the source of the leaks, but he refused. His friend and fellow director Thomas Perkins quit the board to protest the surveillance tactics used during the probe.
Several critics had called for the ouster of Dunn, who initiated the internal investigation last year.
On Tuesday, she expressed regret over the tactics used. "Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques. These went beyond what we understood them to be, and I apologize that they were employed," she said in a statement. (For more on Dunn's rise from daughter of a Las Vegas showgirl to corporate executive, click here.)
Hurd said he's taking steps to make sure inappropriate investigative methods aren't used again. "They have no place in HP," he said in prepared remarks.
Dunn had insisted she did not know that the investigators used personal information to pose as HP directors and reporters and got AT&T (Charts) and other phone companies to turn over records of home and mobile phone calls.
But her credibility crumbled in the fallout of the leak investigation, and it has been clear for a number of days that she had to go, according to James Post, a professor at Boston University School of Management.
"What she demonstrated in this incidence is poor judgment, and that cost her the position as board chairman," Post said.
HP under fire
In statements issued by HP on Tuesday, company directors expressed the desire to move past the boardroom fray, but that may prove challenging as the investigation into HP's leak probe widens.
Dunn's departure reflects the board's dissatisfaction with the way the company investigated the source of the leaks, but this doesn't resolve the potential criminal proceedings or ongoing investigations facing the firm, said John Capers, a lawyer at King & Spalding.
The "pretexting" tactics HP's investigators used during the investigation have come under scrutiny from officials ranging from the Justice Department to Congress to state authorities. Pretexting is when someone poses as someone else to gain access to personal information.
"The interest regulators have shown in this matter will be the most vexing problem for the company," said William Sullivan, who heads the national securities litigation practice group at law firm Paul Hastings.
HP disclosed in a Securities and Exchange Commission filing Monday that the U.S. Attorney's Office in Northern California had "informally contacted" the company about the methods used during the company's investigation.
The House Energy and Commerce Committee also joined the fray Monday. The committee sent a letter to Dunn, asking HP to name the investigators it used in the leak investigation and turn over other records.
"The Committee is troubled by this information, particularly given that it involves HP - one of America's corporate icons - using pretexting and data brokers to procure the personal telephone records of the members of its board of directors and of other individuals without their knowledge or consent," the letter read.
One positive fallout of the boardroom fracas, according to experts: having Hurd as both chairman and CEO. "Clearly there is some dysfunction on this board, and changes need to be made to make it more effective," corporate governance expert Rick Steinberg said.
HP needs an individual who can lead the company and provide a unified front, and, by holding both positions, Hurd will create a single point of authority. It also appears Hurd was not heavily involved in the investigation, which makes him a natural choice for the chairman post, Steinberg said.
Shares of HP have surged nearly more than 80 percent since March 2005, when the company tapped Hurd as CEO. During that same time shares of IBM have fallen 11 percent, while Dell shares have plunged 44 percent.
The only HP competitor with stock growth nearly as strong as its own during the period is Apple (Charts), whose shares are up 70 percent. But Apple is facing its own probe of its stock options program.
---Reuters contributed to this story.