HP shifts focus to damage control

CEO offers to testify before House panel

September 22, 2006|By Michelle Quinn and Pete Carey | Michelle Quinn and Pete Carey,San Jose Mercury News

SAN JOSE, Calif. -- With pressure mounting over its troubled internal investigation of boardroom leaks, Hewlett-Packard is shifting into serious damage control.

Chief Executive Officer Mark Hurd, until recently out of the spotlight on the investigation, offered yesterday to testify before a congressional committee conducting an inquiry on the investigation. The offer came after a committee member suggested looking at whether Hurd should testify.

In another part of HP's damage control, Hurd will hold a news conference today at the company's Palo Alto, Calif., headquarters to spell out steps it is taking to address problems revealed by the way it handled the investigation into boardroom leaks.

Hurd's offer came as HP, once held up as a model of corporate ethics, has faced a continuing furor over the investigation, initiated by its top managers, that spied on board members, reporters and others by obtaining their phone records without permission.

Also yesterday, HP disclosed that the Securities and Exchange Commission asked the company to provide documents on its investigation and the resignation of Tom Perkins from the board.

Hurd's offer to testify before the congressional committee came after one committee member raised questions about whether he should be invited to appear.

"Given allegations and media reports regarding Mr. Hurd's possible knowledge of HP's various deceptive investigative techniques, I would expect that members and staff of the subcommittee will take a hard look at whether it is appropriate for Mr. Hurd to appear before the subcommittee next week," Rep. Bart Stupak, a Michigan Democrat, said yesterday.

Several major newspapers carried articles yesterday linking Hurd closer to HP's boardroom leak investigation, including one in The Washington Post suggesting that he might have approved a scheme to put a software device on a CNET reporter's computer intended to reveal the source of her stories about board meetings.

"The committee began inviting testimony from witnesses last week, and the list has grown to eight who are expected to appear," said committee spokesman Larry Neal.

"Nothing precludes the committee from expanding that list, of course, or, for that matter, seeking additional documents," Neal said.

The Hewlett-Packard board met yesterday to discuss the crisis.

As more information has emerged about the investigators' tactics, Hewlett-Packard has faced criticism that its outside investigators may have broken laws and crossed ethical lines.

Stock takes a hit

Also yesterday, for the first time since the trouble began, Hewlett-Packard's stock took a big hit, sinking $2.04, or 5.6 percent, to $34.74.

HP's decision to initiate public relations damage control is an attempt to reverse the negative impact on its image that has come from news headlines nationwide since early this month.

The company has remained quiet since its Sept. 11 announcement that board Chairman Patricia Dunn would step down to be replaced by Hurd in January.

Hewlett-Packard has maintained Dunn and other executives did not know the methods used by its investigators, some of whom were hired by outside consultants.

But this week, the spotlight shifted to Hurd as published reports of internal HP e-mail suggested that Hurd, Dunn and other Hewlett-Packard managers knew more about the investigation than previously believed and may have approved some aspects.

Ready to talk

In a statement yesterday, Hurd said the company is ready to begin talking.

"What began as an effort to prevent the leaks of confidential information from HP's boardroom ended up heading in directions that were never anticipated," Hurd said.

"HP is working hard to determine exactly what took place and when, and without all the facts it has been difficult for us to respond to the questions that have been raised. We plan to give as much clarity as we can to these matters," he said.

HP also disclosed it has hired the Philadelphia law firm of Morgan, Lewis & Bockius, which has built a reputation for its defense in white-collar criminal cases.

Separately, Dunn hired James Brosnahan, a trial lawyer at the San Francisco law firm Morrison & Foerster who has had other high-profile clients.

San Jose Mercury News correspondents Scott Duke Harris and Therese Poletti contributed to this article.

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