Ousted HP Chair: I Thought Spying on Reporters, Board Members Was Legal

By: Hewlett-Packard's ousted chairwoman says her decision to initiate the corporate spying probe that is drawing scrutiny from Congress was made in concert with others at the technology company and she never doubted the legality of the methods used.

Patricia Dunn, in testimony prepared for a House hearing, said she discussed the conduct of the company's leak investigation with CEO Mark Hurd and board members -- getting a clear impression that the directors were satisfied with it. The cloak-and-dagger probe conducted from early 2005 through last spring used a shadowy network of private investigators who intruded into the personal lives of journalists and HP directors.

Dunn and Hurd were appearing at Thursday's hearing by the House Energy and Commerce Committee with other top executives and hired detectives. Some volunteered to testify; others were attending under the summons of a congressional subpoena.

As lurid details of the affair emerged in recent weeks, HP's stock took a one-day hit of 5 percent and corporate casualties have mounted. The computer and printer maker announced the resignation of general counsel Ann Baskins on Thursday just ahead of the hearing where she was scheduled to testify, and her attorneys said she is invoking her Fifth Amendment right against self-incrimination and is not answering lawmakers' questions. The departure of Baskins, who has worked for the company since 1982, follows those of Dunn, two other directors and two high-level employees so far.

"Ms. Baskins always believed that the investigative methods that she knew about were lawful, and she took affirmative steps to confirm their legality," her attorneys told the committee in a letter Thursday. "Ms. Baskins repeatedly sought and obtained assurances from a senior HP counsel that the techniques about which she knew were entirely lawful."

Hewlett-Packard Co., the world's largest technology company and long a respected anchor of Silicon Valley, engaged a private detective firm for its quest to trace and stem boardroom leaks to journalists of confidential information. The firm in turn hired a network of investigators who masqueraded as HP directors and employees and as reporters to obtain their telephone records, surveilled them and their relatives, sifted through their garbage, and used an e-mail sting to dupe one of the reporters.

"I never doubted ... that what they were doing was legal," Dunn said in her testimony, which was released by the committee on Wednesday.

Dunn said she asked Ronald DeLia, the operator of the detective firm hired by HP, "at every point of contact for his representation that everything being done was proper, legal and fully in compliance with HP's normal practices."

Dunn disclosed that she learned in the spring of 2005 that the probe involved obtaining access to phone records.

In addition to the inquiry by the House committee, federal and California prosecutors are investigating whether company insiders or hired investigators broke the law in the way the practice of pretexting was used in the leak probe. California Attorney General Bill Lockyer has said he has enough evidence to indict HP insiders and contractors. And the Securities and Exchange Commission is pursuing a civil inquiry.

Hurd, who succeeded Dunn last Friday as chairman of Palo Alto, Calif.-based HP, apologized in his testimony for the hearing to those whose privacy was violated in the leak investigation.

"How did such an abuse of privacy occur in a company renowned for its commitment to privacy? It's an age-old story. The ends came to justify the means," he said.

Hurd said Dunn had told him of the existence of the investigation, "but I was not involved in the investigation itself."

So closely tied was DeLia's firm, Security Outsourcing Solutions Inc. of Needham, Mass., to Hewlett-Packard -- for which it worked almost exclusively for eight years -- that Dunn refers to the firm as a "captive subsidiary" of Hewlett-Packard.

In a twist, it was DeLia who performed the background check on Hurd when the company was vetting him last year as a candidate for CEO.

Besides Dunn, Hurd and Baskins, Larry Sonsini -- HP's outside lawyer and one of Silicon Valley's most influential figures, who assured company executives of the legality of the spying probe -- agreed to appear at the hearing.

The committee has ordered DeLia and two other key figures in the leak probe to testify: Kevin T. Hunsaker, until recently the company's chief ethics officer, and Anthony R. Gentilucci, who managed HP's global investigations unit in Boston.

Five private investigators believed to have served as the foot soldiers in the company's efforts to identify the source of leaks, impersonating journalists, HP directors and employees to procure their phone records in a practice known as "pretexting," also were subpoenaed to testify.