Hewlett-Packard heads to the Hill
House Committee to question key executives at pretexting hearing as tech giant grapples with leak probe scandal.
NEW YORK (CNNMoney.com) -- The growing Hewlett-Packard leak probe scandal comes under the scrutiny of Congress this week, when lawmakers aim to address a key question: What went wrong at the Silicon Valley stalwart?
Insiders linked to HP's controversial leak probe head to Capitol Hill on Thursday to explain how internal controls at one of America's corporate icons could unravel to the point where spying of its directors, journalists and employees was allowed. Those making the trip include embattled chief executive Mark Hurd, recently ousted chairman Patricia Dunn and HP chief counsel Ann Baskins.
Company officials are likely to face tough questions about how they could have permitted the use of "pretexting," a practice where someone impersonates someone else in order to gain access to personal information like phone records.
The hearing is part of a wider congressional investigation into pretexting and comes as California's attorney general prepares to file criminal charges against HP officials and outside contractors. It also comes as Hurd moves into the center of the scandal's spotlight.
Since HP said earlier this month that pretexting was used by its investigators, the company has been slow to reveal details about the probe. Hurd, who has held the top spot at HP for nearly 18 months, recently shed light on his role, but several questions remain unanswered.
"We've still got the basic same question: Who knew what when?" said Nell Minow, co-founder of the Corporate Library, a corporate governance firm.
With Dunn's recent resignation from the HP board, that question will fall squarely on Hurd, who has already admitted he approved questionable activities. Specifically, Hurd said he approved the sending of a fake e-mail to a reporter, although he said he didn't know about a software tracer planted in the message. The possible intent of the tracer was to track what the reporter did with the e-mail and locate the source of the leak.
"All roads lead to the CEO's desk. He is now the person with full responsibility for the situation at HP," said James Post, a professor at Boston University School of Management.
Two HP executives, Kevin Hunsaker and Anthony Gentilucci, have been subpoenaed to appear before the committee, according to HP. The company also said that Gentilucci, who headed investigations for HP, has resigned.
In addition to hearing from company insiders, the House committee has subpoenaed Ronald DeLia, the managing director of Security Outsourcing Solutions. Another private investigative firm has been requested to testify as well.
Since the outside investigators hired by HP potentially are at much greater legal risk, they could end up taking the Fifth Amendment privilege against self-incrimination, legal experts said.
But the message HP has been sending - Hurd volunteered to testify before the committee - suggests the company will be more cooperative.
"It would send an incredibly negative message if HP executives were to refuse to answer questions. If they had intended to do that they wouldn't be appearing," said Jill Fisch, a professor at Fordham University School of Law.
Besides focusing on what went wrong at HP, lawmakers will want to know what steps HP is taking to correct internal controls. Hurd has to reassure the Congressional committee that HP knows how to fix what went wrong and make sure it doesn't happen again, Boston University's Post said.
On Friday, HP announced Dunn's resignation and named board member Richard Hackborn lead independent director of the company, speeding up moves that were supposed to take place in January. The company also said Bart Schwartz, a former U.S. prosecutor, will undertake an independent review of the company's business standards.
But Minow from the Corporate Library said the company needs to offer more transparency if it wants to regain its credibility.
"My own question is: Why should we believe you from now on? What steps are they taking to establish a truly credible and independent board of directors that can work in a functional way?" she asked.
Shares of HP (Charts), which have outperformed rivals Dell (Charts) and IBM (Charts) in the past year, have held up despite recent events. The stock is down about 2 percent since the scandal surfaced early this month. However, investors say the more Hurd is at risk, the more vulnerable the company's shares.