HP's Hurd: Dunn Out As Board Chair

The deepening HP leak investigation has claimed as its first victim, chairman of the board Patricia Dunn, and for the first time, linked company president and CEO Mark Hurd to the scandal.

While Dunn, who resigned from the board effective immediately, has been criticized for her knowledge of, and participation in, what appears to be in some cases, illicit intelligence schemes, Hurd had been staying safely out of the fray.

Speaking at the company's first press conference relating to the scandal since news of HP's media leak investigation broke, Hurd said he will take on Dunn's duties as board chairman, and publicly acknowledged his role in at least part of the investigation. (Hurd's statement is posted on the HP Web site.)

The initial plan, announced just last week, had Dunn stepping down as chairman in January, 2007, but retaining a seat on the board.

Hurd also named Richard Hackborn as independent lead director of the company.

Hurd's acknowledgement followed a report in the Washington Post that he had personally approved an elaborate plan to trick a reporter into identifying her sources by sending her false information. The scheme was part of an overall intelligence operation that involved embedding 'tracers' in emails sent to the press, making up phony personas to mislead and spy on reporters, falsifying documents and conducting physical surveillance. "What began as an investigation with the best intentions has turned in a direction we could not have anticipated," said Hurd, in his first public remarks on the investigation scandal. "Now we know the depth of what's transpired, I take full responsibility to get this right."

Hurd also took some personal responsibility for getting some of it done. He said he knew about the plan to send false emails to a journalist, and he approved of it. However, he says he does not recall seeing, or approving, of the use of tracer technology, which was supposed to be embedded into a phony email designed to find out who a targeted journalist was talking to. Mike Holston, an attorney with Morgan Lewis, a law firm retained by HP on Sept. 8 to investigate what transpired, and who was involved in the leak probe, says his investigation supports Hurd's recollections.

Citing his upcoming testimony before a Congressional Committee on Thursday, Sept. 28, Hurd declined to take any questions.

"I'm confident we have a good understanding of what transpired around the investigation. Some of the findings are very disturbing to me," said Hurd. "I extend my sincere apologies to those journalists investigated, and everyone impacted. HP has a distinguished history of uncompromising integrity. This is not indicative of how we conduct business at HP."

Hurd went on to say he believes that the illicit investigative tactics that were used were "isolated incidents," and that they cannot be allowed to occur in the company again.

Holston, who also spoke at the press conference, said there were two phases of the HP leak investigation. The first phase, which began early in 2005, concluded late that summer without uncovering the source of the leaks. Then, after a Jan. 23, 2006 story came out in the press, the second phase of the investigation began.

Holston said that HP hired Boston-based Security Outsourcing Solutions to help in the investigation. In conjunction, they:

* Obtained the telephone records of two current employees, seven board members and their families, along with nine journalists by pretexting, which means an investigator pretended to be someone else in order to con a utility into handing out the personal information;

* Used the social security numbers of one HP employee, three board members and four journalists to obtain phone records. Holston says it is not clear at this point what company employees were involved in gathering and handing out the social security numbers;

* Created a fictitious email account, a fictitious persona of a disgruntled senior HP executive and an email message loaded with a 'tracer' in an attachment. Investigators were reportedly hoping the email recipient would forward it on to whoever was the board leak and the tracer would send that person's identity back. Holston says there was no confirmation that the tracer was ever activated;

* Conducted surveillance on a particular board meeting to see if there was a journalist outside, on an HP board member on a trip to Boulder, Colo. to be a keynote speaker at a conference, on the same board member and his family at their California home, and on a journalist at her residence.

These actions have fueled state, federal and Congressional investigations. Prosecutors from the California Attorney General's Office and from the U.S. Attorney's Office are investigating the pretexting incidents. In addition, Hurd and Dunn will testify before the U.S. House Energy and Commerce Committee on Thursday, Sept. 28.