Update: HP execs face angry Congress on boardroom scandal

Several witnesses took the Fifth Amendment at today's hearing

Hewlett-Packard Co.'s officials today received a tongue-lashing from members of the U.S. House Energy and Commerce Committee, who ridiculed HP officials, saying they have no excuse or justification for snooping on the private telephone records of HP board members and journalists.

"I'm still waiting for somebody to describe a legitimate way short of a subpoena [for someone to] obtain other persons' phone records without their permission," said Rep. Joe Barton (R-Texas), chairman of the full committee.

Some of the most direct comments about what may be in store for HP officials came in a warning from Rep. Clifford Stearns (R-Fla.), who compared the company's actions with those taken by Enron. When Enron officials testified before the same committee, officials used a "cloak of cover," he said -- meaning that they had talked to their legal staff and believed they were acting under sound advice.

Stearns looked at Patricia Dunn, the former HP chairman, who was seated at the front of the hearing room awaiting her turn to testify, and told her that she can't rely on legal advice. "In many ways, I don't think you can hide behind the cloak of cover of your legal team, and you must take personal responsibility," said Stearns.

Rep. Greg Walden (R-Ore.) agreed. "Where was someone to say, 'This just isn't right?'" Alden asked. "To me, the synonym of pretexting is lying -- I'm going to lie to someone else so I can get information on someone else."

Rep. Diana DeGette (D-Colo.) wondered whether similar incidents are occurring at other U.S. companies. "Something has gone really wrong at [HP]," DeGette said. "I don't understand how the entire board of directors ... saw or knew so little when so much was going on."

In testimony released yesterday, Dunn said she believed that the company was acting legally, based on the advice she was receiving from the company's legal team at the time. In separate prepared testimony, HP CEO, President and Chairman Mark Hurd said he should have kept closer tabs on the probe.

HP faces several state and federal investigations over its efforts to plug boardroom leaks by hiring an outside company that used pretexting to access the phone records of board members and nine journalists. But the toughest thing HP officials may face today is scalding criticism from House members.

HP's investigation was described by various members of the subcommittee on oversight and investigations as "completely out of bounds" and something that resembled a "third-rate detective novel."

Comparing the investigation to the Keystone Kops, Rep. John Dingell (D-Mich.) said it was an "insult of the grossest sort to the original Keystone Kops." He also called it a "a fine case study in deceit and dishonesty."

The subcommittee called more than a dozen people to testify about HP's acquisition of private phone records to attempt to determine the source of a board leak. But most declined to testify, citing the Fifth Amendment.

HP's general counsel and senior vice president, Ann Baskins -- whose resignation was announced early this morning -- was among those who exercised Fifth Amendment rights and refused to testify.

Baskins, in a letter written by her legal counsel and handed out to reporters waiting for the hearing to begin, said she "acted legally and ethically at all times."

"Ms. Baskins always believed that the investigative methods that she knew about were lawful, and she took affirmative steps to confirm their legality," wrote K. Lee Blalack of O'Melveny & Myers LLP and Cristina Arguedas of Arguedas, Cassman & Headley LLP. "Let us be clear: Ms. Baskins repeatedly sought and obtained assurances from a senior HP counsel that the techniques about which she knew were entirely lawful."

Fred Adler, the HP security manager and a 28-year veteran of the California attorney general's office and the Department of Justice, said in a written statement that he raised questions about the probe.

"When we grew concerned that legal standards may not have been met in obtaining personal phone records, a co-worker and I brought the matter to the attention of our managers," Adler wrote. "My manager, a former law enforcement officer, appreciated our concerns and raised them with counsel. We were all subsequently assured by counsel everything being done met both federal and state standards. We were advised that this opinion was the result [of] a least two attorneys."

Dunn, in her testimony today, insisted that her queries of legal staff over its investigative methods assured her that the company was using "standard investigative practices" and acquiring records "drawn from publicly available sources."

"I relied on the expertise of people with whom I had full confidence," said Dunn, noting that she was a subject of the investigation as well. "I, too, was pretexed."

Rep. Ed Whitfield (R-Ky.), the committee chairman, asked Dunn about her knowledge of pretexting -- as well as discussions she may have had with Ronald DeLia, the managing director of Security Outsourcing Solutions Inc., in Needham, Mass. Security Outsourcing Solutions was hired by HP to investigate the board leaks.

"I have no recollection of a conversation with Mr. DeLia that included the word pretexting," said Dunn, adding that she first heard of the word in June 2006, when HP's private counsel, Larry Sonsini, began delving into the issue.

Whitfield then asked about a note from Baskins that included a reference to pretexting and calling carriers. Further down in the note, said Whitefield "they have your initials down here with questions that you asked."

"I do not recall being in that meeting," said Dunn, noting it might have been a telephone meeting.

Dunn took questions from the committee from late morning well into the afternoon and often appeared to be on the defensive. The committee has collected a mass of documents, voluntarily turned over by HP, about the pretexting scandal -- and committee members cited them like lawyers in a courtroom in an effort to catch the former board chair in a contradiction.

Dunn, however, repeatedly stressed that she was unaware until this summer that pretexting was being used to acquire phone records.

DeGette at one point shifted the hearing's focus to ask about HP's plan to create a fictitious person, Jacob, whose job was to sting reporters. "You're the one who ordered the investigation," DeGette said.

Dunn noted that the idea was sent to company management -- including Hurd -- for approval.

Walden cited something DeLia wrote in 2005 indicating he had discussed pretexting with Dunn. "You see why I'm troubled by this," said Alden.

Dunn said Walden was drawing the wrong inferences from the memo, telling him, "I had no reason to think anything illegal was going on."

Also testifying was Sonsini, who said his law firm was not involved in the design and conduct of the investigations. "Indeed, I was not even aware of them when the investigations were being conducted," he said.

He called pretexting "plainly wrong" and said he was asked to advise the board after the investigations had already been completed. Sonsini said that while pretexting was not " specifically unlawful," his firm didn't know whether the methods used by HP's private investigators were legal.

Computerworld's Todd R. Weiss contributed to this report.

See more coverage:

  •   HP's Hurd plans to call leak probe 'a rogue investigation'

  •  HP's general counsel quits

  •  House panel on HP scandal adds second day of hearings

  •  As HP scandal unfolds, Hurd's power grows

  •  Dunn out immediately as HP chairman; Hurd apologizes for leak scandal

  •  Report: Hurd knew of planned deception campaign

  •  SEC broadens probe of HP scandal

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

  •  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:

  •   Sorry, Mr. Hurd, but these weren't isolated instances

  •  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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