House Panel Says Pretexting Illegal, HP Defense Unbelievable

The congressional panel grilled former chairwoman Patricia Dunn and HP CEO Mark Hurd about what they knew, when they knew it, and who was responsible.
A review by outside counsel Larry Sonsini's firm concluded about a month ago that Dunn was "probably told" investigators "may have used" false pretenses but was always assured investigators used legal methods. Dunn disagreed with the firm's account -- compiled by a former federal investigator -- and statements an investigator made during the review of the probe. Sonsini stood by it during his testimony.

Two members of the congressional panel compared the scandal to Enron in terms of the damage it may have done to erode public confidence in U.S. corporations.

"I had the impression that this went on in an underworld of scoundrels and sleazes," said Jay Inslee, a Washington Democrat. "The thought that a major company like HP would be involved in that, never crossed my mind. That's what's so disturbing to me."

Dunn, Hurd and Sonsini said they had never heard of an investigation similar in techniques and scope in the corporate world.

Hurd and Dunn claimed they never heard about concerns expressed by HP's own investigators about whether the company was violating laws by obtaining the phone records. Those concerns were put in at least one e-mail to Kevin Hunsaker, who was HP's ethics officer and a lawyer.

When pressed about who was responsible for the legality of the investigation, Dunn named Baskins. She said Baskins relied on information from Hunsaker.

In her written testimony, Dunn said she still was not sure whether pretexting, or lying to get private phone records, was legal "as opinions vary." She also defended the investigation saying that many critics show a "profound lack of understanding" of how corporate boards work. During her verbal testimony, however, she said pretexting was wrong.

"It's fraud," she said after hours of questioning. "It's the fraudulent misrepresentation of identity. It's fraud, and I would have brought it to the attention of the chair of the auditing committee if thought fraud was involved."

Dunn said she understood the investigators doing the work had used similar methods for HP for the past eight or nine years.

"Conspicuous in its absence in your testimony is any degree of contrition," Florida Republican Cliff Stearns said, before sparring with Dunn and finally insisting that she use the word "yes" or "no" to tell whether she was responsible.

"I do not accept personal responsibility for what happened," she said.

That was in stark contrast to Hurd, who said he accepted responsibility for all aspects of the company's operations, whether or not he was consulted.

John Dingell, a Michigan Democrat, characterized the behavior as "shameful and shameless" and said shareholders would have to hold the company responsible.

During the hearing, HP's stock continued to rise. It opened at $35.20 and closed up 1.64 percent at $35.97. The company continues to face several more government investigations.