Hurd: Dunn leaving HP board, effective immediately

The CEO also acknowledged 'isolated incidents of impropriety'

Editor's note: A more detailed follow-up to this story is now available online.

Hewlett-Packard Co. CEO and President Mark Hurd late today said HP Board Chairman Patricia Dunn is stepping down from the board immediately as the company continues an investigation into past efforts to plug corporate leaks (download PDF).

Richard Hackborn has been named independent lead director of the company, also effective immediately. And Bart M. Schwartz, a former U.S. prosecutor, has been named as counsel to perform an independent review of the events surrounding the leak scandal. He will report to Hurd and Chief Financial Officer Bob Wayman.

HP CEO and President Mark Hurd

HP CEO and President Mark Hurd

Image Credit: HP"This is a complicated situation, and the more I look into it, the more complicated it becomes," said Hurd. "As of today, we still do not have all of the facts."

He also said an internal probe had uncovered facts he considers "very disturbing," calling them "isolated incidents of impropriety."

Facing a deepening scandal over boardroom leaks, Hurd apologized for the company's actions, explained his role in it and said he first learned of the effort to plug leaks in July 2005.

"I also cannot guarantee that we will ever be able to obtain all the information regarding this investigation," he said. "This is due to it complexity and the number of people involved, with many of them being outside of the company."

Patricia Dunn

Patricia Dunn

Image Credit: HPWhile many of the right processes were in place, "they unfortunately broke down," and no one in the management chain, "including me, caught it," he said.

Hurd said he attended "a brief portion" of a meeting in July 2005 where the leak issue was discussed and noted that the matter came up again in January 2006 and again in February. At the latter meeting, Hurd said, "I was informed by the investigation team that they intended to send an e-mail containing false information in an effort to identify the source of the leaks."

It's been reported that an e-mail was sent to a CNet reporter with tracer technology. Hurd said that "I was asked and did approve the naming convention that was used in the content of the e-mail -- I do not recall seeing or do I recall approving the use of tracer technology.

Along with saying he had no knowledge of the tracer technology, Hurd also said he didn't read a report he should have. He did not explain why this particular report, sent in March 2006, was important. But based on the regret expressed at the news conference, it evidently was a key piece of information.

In March, Hurd said the investigative team had identified the source of the leaks. "I understand there was a written report of the investitation addressed to me and others but I did not read it -- I could have and should have.

"I commit to get to the bottom of this," said Hurd. "I believe we have now a substantive, substantial set of the facts -- and although there may be others, I'm confident that we have a good understanding of what has transpired around the investigation.

"I extend my sincere apology to those journalists who were investigated and to everyone who was impacted," said Hurd, adding, "HP has a distinguished history of conducting business with uncompromising integrity. We believe that these were isolated incidents of improprietry and not indicative of how we conduct business at Hewlett-Packard."

He noted early on that leaks from the board prompted the company's efforts. "This [problem of leaks] was taken very seriously," Hurd said. "The fact that we had leaks from the board needed to be resolved."

Today's statement -- Hurd did not take questions -- marks the first time HP's CEO has directly addressed the boardroom scandal that has swirled around the company since it acknowledged earlier this month that it had gone after leakers.

Questions about that effort, which involved the practice of pretexting to try to determine who was leaking sensitive corporate data about the company, are now the focus of several investigations. The biggest question has been whether the company employed illegal practices to get information.

HP has admitted that a private investigative firm it hired used pretexting, whereby investigators pretended to be journalists in order to obtain their personal telephone records.

The California attorney general's office is looking into whether any laws were violated; the U.S. Securities and Exchange Commission has asked for more information about the resignation of two board members related to the leak probe; and a House subcommittee has called a number of HP officials to testify at a hearing next week.

Hurd has already said he would be willing to testify before the subcommittee, and the subcommittee accepted his offer.

The SEC wants more information on the circumstances around Thomas Perkins' resignation as a board member over the spying scandal earlier this year. Perkins has said he left the board amid concerns about how the company was handling the leak investigation.

A second board member, George Keyworth, left the board this month after acknowledging he was a source of information about the company.

After reports surfaced this month about how involved HP executives may have been in overseeing private investigators' activities, the company brought in the law firm of Morgan, Lewis & Bockius LLP to investigate. A representative of the firm spoke at today's news conference.

News reports in recent days have revealed that Hurd, Dunn and other corporate executives were more involved in the leak probe than they had earlier indicated.

Gordon Haff, an analyst at Illuminata in Nashua, N.H., listened in to the call and said the key question is whether "facts as now known are indeed the substantial body of facts. If that is indeed true, HP does have an opportunity to put this behind it without serious business impact. If not, all bets are off. At the end of the day, that's the critical question -- not whether apologies were worded sincerely enough.

"What's been so damaging the past week is the daily revelations about yet more and more unethical and possibly illegal actions. It was ugly, but if there isn't more they should be able to get beyond this," said Haff.

What do you think about today's statements? Is HP going far enough in responding to the scandal? Post your thoughts and see what others have to say in our Sound-off blog.

See more coverage:

  •  Report: Hurd knew of planned deception campaign

  •  SEC broadens probe of HP scandal

  •  House panel widens HP probe

  •  Update: Calif. says it has evidence to charge HP officials

  •  Hurd to replace Patricia Dunn as HP chairman in January

  •  HP: 'No Surprise'

  •  Opinion: A demand for immediate and full disclosure

  •  Reporters' phone records accessed by HP during leak probe

  •  SEC filing shows board infighting, leaks at HP

Blogs:

  •  HP spying, round 4: Hurd heard

  •  Frank Hayes: HP: She really should have known better

  •  Preston Gralla: Was David Ortiz the hacker in HP board scandal?

  •  Joyce Carpenter: HP improves Integrity

  •  IT Blogwatch: HP spy vs. leaker (and 2356 days of Noah)

  •  Martin McKeay: Taking Corporate Spying to the Next Level

Copyright © 2006 IDG Communications, Inc.

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