Congress, FBI and U.S. Attorney Ask HP for Records

Congress and federal investigators on Monday entered the fray surrounding Hewlett-Packard Co.'s (HPQ) possibly illegal probe of media leaks, as the company's board met to discuss the fate of its embattled chairwoman.

With the FBI, the U.S. Attorney for Northern California and the House Energy and Commerce Committee all joining the scandal swirling around HP's Board of Directors, the resignation of Chairwoman Patricia Dunn seemed likely, one expert said.

"The right thing to do now is for her to step down, clear the air and let the company carry on," said Roger Kay, who follows HP as president of Endpoint Technologies Associates, a market research firm.

Hewlett-Packard's board reconvened Monday evening to discuss whether Dunn should remain chairwoman following her role in the investigation that may have used illegal means to obtain the personal phone records of colleagues and journalists. The board met for three hours Sunday without a decision.

Earlier in the day, the Congressional committee asked HP to turn over "records and information related to the company's reported effort to obtain private phone records." The request was made as part of the panel's ongoing investigation into "pretexting" — the practice of impersonating a person in order to access their personal information.

HP hired private investigators who used Social Security numbers and other personal information to impersonate HP directors and journalists. The impostors then tricked phone companies into turning over detailed logs of their home and cellular phone calls.

FBI Deputy Director John Pistole said in an interview with The Associated Press in San Francisco that the bureau opened its probe Monday and was investigating two possible crimes: illegal computer intrusion and wiretapping.

"When allegations of a federal crime are brought to the FBI's attention we have to make a determination whether we'll initiate an investigation," Pistole said. "Obviously if the U.S. Attorney has reviewed information and believes there is something for the FBI to investigate, we'll work closely (together)."

He did not give a timetable for when the inquiry would be completed.

The U.S. Attorney office issued a statement saying it was "investigating the processes employed in an investigation into possible sources of leaks."

The Palo Alto-based maker of computers and printers said in a regulatory filing it was cooperating fully with the federal inquiry, along with the investigation by the state attorney general, which requested similar information.

An HP spokesman had no further comment.

California Attorney General Bill Lockyer said last week that his office was investigating and had determined that HP's probe broke two state laws governing and illegal access to computer records. It's still unclear, however, whether the company or anyone acting on its behalf will face civil or criminal charges.

Dunn, a former freelance journalist who has become one of the most powerful women in corporate America, ordered the outside investigation of fellow board members to determine who anonymously leaked information, especially as it related to the job status of former chief executive Carly Fiorina.

Although a common tactic among private investigators, pretexting tests the bounds of California law.

A federal investigation further complicates the situation for HP, experts said.

"It opens the company to more scrutiny on a broader and more powerful level," said Ken Sukhia, a former U.S. Attorney in Tallahassee, Fla.

Martin Reynolds, vice president of the research firm Gartner Inc. (IT), said it may be more likely that criminal charges are filed against the private investigator, rather than Dunn or another HP board member. The company has not revealed the name of the investigator it used.

That may be one reason investors have largely ignored the scandal. HP shares rose 27 cents Monday to close at $36.36 on the New York Stock Exchange, near the top end of its 52-week range of $25.53 to $36.73.

"It's a good thing they're not trying to close a difficult merger or negotiate for a new CEO right now," Reynolds said. "But the business of HP and the leadership there is strong enough that this is just not an issue. It's certainly embarrassing, and it's obviously not the best press, but the good news is this is pretty much divorced from the day-to-day operations of HP."

The Federal Communications Commission has also taken interest in HP, asking AT&T Inc. (T) last week how the company's private investigators managed to obtain the private phone records of board members and journalists.

Following the investigation, board member George Keyworth II was identified as the source of the leak, and HP responded by barring him from seeking re-election.

Another HP director, longtime Silicon Valley venture capitalist Tom Perkins, resigned from the board in May in protest of the investigators' tactics.

Perkins this weekend called on Dunn to resign.

Dunn told The Associated Press last week she would resign if asked, but said several fellow board members had urged her to remain on the job despite the criminal investigation. She also said the media leaks were an "egregious breach" of the company's standards and that the board of directors fully backed an investigation to root out the source.

The nine reporters whose phone records were compromised are Pui-Wing Tam and George Anders of The Wall Street Journal; Peter Burrows, Ben Elgin and Roger Crockett of BusinessWeek; John Markoff of The New York Times; and Dawn Kawamoto, Tom Krazit and Stephen Shankland of CNET Networks Inc.'s

Investigators hired by HP also targeted Thomas Shankland, a semiretired geophysicist in Los Alamos, N.M. who is Stephen Shankland's father.

Keyworth, the board member who will not be re-nominated, was the former science adviser to President Reagan and director of the Physics Division at Los Alamos National Laboratory, which he joined in 1968. Keyworth has acknowledged leaking information to reporters.

The younger Shankland is married to Associated Press reporter Rachel Konrad, who has also covered HP.