SAN FRANCISCO – Revelations that Hewlett-Packard Co. (HPQ) officials used questionable tactics in an internal investigation into media leaks have caught the attention of California's attorney general, who's launched his own probe into the computer maker.
Attorney General Bill Lockyer subpoenaed some HP officials Wednesday in a probe he characterized as still being in the "early fact-finding stage."
Lockyer refused to say whether criminal charges would be filed against Chairwoman Patricia Dunn, other directors or the private investigators HP hired to find out who leaked confidential information to the media. He said the state also could charge HP with civil violations and order the company to pay fines.
"I don't have a settled view on whether it was illegal yet, but it certainly was colossally stupid," Lockyer said in a phone interview Wednesday.
HP disclosed in a filing Wednesday with the Securities and Exchange Commission that it sought the private telephone records of the company's board members in its leak investigation. Private investigators used the invasive and possibly illegal practice of "pretexting" — posing as someone else to get personal information about that person.
HP said in the SEC filing that the company would decline to nominate one board member, George A. Keyworth II, for re-election because he was a source of the leaks. Keyworth, who has acknowledged leaking information, will be gone by March 2007.
The company also said lawyers hired to review its tactics could not determine if the investigation "complied in all respects with applicable law."
Experts say Dunn, who announced the firing of HP Chief Executive Carly Fiorina, may be the next to go.
"If the chairman thinks this is the way business ought to be conducted, maybe it's time for her to take a sabbatical," said Peter Morici, professor at the Professor Robert H. Smith School of Business at the University of Maryland. "It's arrogant and inappropriate."
Identity thieves use pretexting to steal social security numbers and other confidential information.
In this case, investigators hired by HP called the phone company and impersonated at least one board member to get logs of phone calls to and from his home, said the attorney of a former HP director.
HP said in the filing it would cooperate with the state probe and that no recording or eavesdropping of directors' phone conversations had occurred. Spokesman Ryan Donovan said the company would not provide other further details of the investigation. Dunn declined to comment.
Keyworth's departure comes after a January article on CNET Network Inc.'s News.com, which included a quotation from an anonymous HP source who described a gathering of HP directors at a posh spa in Southern California. Although the source didn't leak high-level strategic detail or say anything inflammatory, the statement angered Dunn, who has been on the board for eight years.
At a board meeting in May, Dunn identified Keyworth as CNET's source, as well as that of other leaks dating to early 2005. The board asked Keyworth, 66, to resign, but he refused.
The investigation and attempted ouster riled another board member, Tom Perkins, 74, who resigned and stormed out of the May 18 meeting.
In the months since his resignation, Perkins — co-founder of Menlo Park-based venture firm Kleiner Perkins Caufield & Byers — complained to other executives and journalists about the investigation's ethical implications.
His attorney, Viet Dinh, a former assistant U.S. attorney general, says he discovered that one of HP's private investigators also obtained the last four digits of Perkins' social security number.
The investigator used that information to open an online account with AT&T, Dinh said. The investigator then called the telephone provider and impersonated Perkins, offering up his social security digits as proof of identity and asking AT&T to send a record of phone calls to and from his house in December 2005 and January 2006 to a free, Web-based e-mail account.
Perkins was unavailable for comment but issued a statement through his lawyer.
"Despite this current disagreement, Tom Perkins has a warm place in his heart for HP and believes in the prospects and performance of HP under the leadership of Mark Hurd," Dinh said.
Dunn, 52, resigned as CEO of Barclays Global Investors in 2002 to battle breast cancer and melanoma, but she's taken an active role as chairwoman of HP, the 11th largest company on the Fortune 500.
She was one of the board members who hired Fiorina in 1999, but Dunn became disillusioned after years of lackluster stock performance and, in December 2004, wrote a four-page report to Fiorina detailing her concerns.
Dunn announced Fiorina's resignation in February 2005, and two months later introduced Hurd, who was favored by Keyworth and Perkins, among others.
She majored in economics and journalism at the University of California, Berkeley, and worked as a freelance journalist before joining Barclays as a temporary secretary.
Dunn had reportedly grown increasingly upset over HP's leaks to journalists.
Bruce Oliver, professor and director of the Center for Business Ethics at Rochester Institute of Technology, said Dunn had the right to seek out the source of leaks because board members often sign nondisclosure agreements. But she crossed an ethical line in going after the home phone logs, Oliver said.
"To engage in some activity where you're hiring someone to do something on the QT where they're misrepresenting themselves, that's over the line of what constitutes ethical behavior," he said.
Others said the scandal could erode morale on HP's Palo Alto campus.
"This sends a message to employees that the company is willing to do just about anything to protect itself," said John W. Dienhart, business ethics professor at Seattle University. "This sends a bad message to existing employees, and it's bad for attracting good employees from outside the organization."