HP Spying on Each Other

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Usually reserved for HP PDA chat, but hey, let's lighten the mood with clandestine activities.

Investigators for HP sought private telephone records of board members while trying to figure out which director leaked confidential company information to the media, the computer maker disclosed in a regulatory filing Wednesday.

Lawyers hired by HP to review the tactics used in the probe — which included tracking board members' phone calls — could not determine if the investigation “complied in all respects with applicable law,” HP said in the filing.

California's attorney general is also examining the techniques of the investigation, which relied on an often illegal data mining method known as “pretexting.” Investigators hired by HP called the phone company and impersonated at least one board member to get logs of phone calls to and from his home, said the attorney of a former HP director.

California Attorney General Bill Lockyer is investigating whether there were violations of criminal statutes that make it illegal to engage in identity theft and to access computer databases without authorization, spokesman Nathan Barankin said.

Mr. Lockyer's office is investigating five other cases of pretexting, which is a fast-growing sub-segment of identity theft. But Mr. Barankin, who described the HP probe as in the “early fact-finding stage,” would not provide details of the scope of the HP inquiry or others.

“It's a very serious issue as far as this office is concerned because of the privacy implications,” Mr. Barankin said Wednesday of the HP case.

HP said in the filing it would co-operate with the state probe, but spokesman Ryan Donovan said Wednesday morning the company would not comment or provide other details about the investigation.

The company made the disclosures in a filing with the Securities and Exchange Commission, saying its board would refuse to nominate one director, George A. Keyworth II, for re-election because it determined he was a source of the leaks.

Mr. Keyworth — a physicist who served as science adviser to President Reagan from 1981 to 1986 — will end his service on the HP board no later than March, 2007. Mr. Keyworth could not be reached for comment early Wednesday.

Mr. Keyworth's departure comes after a January article on CNET's News.com, which included a quotation from an anonymous HP source who described a gathering of HP directors at a posh spa in Indian Wells, Calif.

“By the time the lectures were done at 10 p.m., we were pooped and went to bed,” the source told News.com.

Although the source didn't leak high-level strategic details or say anything inflammatory, the statement angered HP Chairwoman Patricia Dunn, 52, who has been on the board for eight years.

The chairwoman of the 11th largest company on the Fortune 500 oversaw the ouster of former HP CEO Carly Fiorina in February, 2005, and the hiring of Mark Hurd as her successor — both high-profile moves that also were leaked to the media. Ms. Dunn, CEO of Barclays Global Investors from 1995 to 2002, has been on the HP board since 1998 and was elected chairwoman in February, 2005.

Ms. Dunn oversaw the investigation of leaks and, at a board meeting May 18, identified Mr. Keyworth as the source in the News.com article as well as other leaks dating back to early 2005.

The board then asked Mr. Keyworth, 66, to resign, but the former neutron physicist at New Mexico's Los Alamos National Laboratory refused.

The investigation and attempted ouster riled another HP board member, Silicon Valley venture capitalist Thomas J. Perkins, 74. Mr. Perkins, Mr. Keyworth's friend, immediately resigned and stormed out of the May meeting.

Within days of Mr. Perkins' departure, HP filed a standard 502-a form with the SEC — not a 502-b form, which would have indicated Mr. Perkins' leaving was related to an internal disagreement.

In the months after his resignation, Mr. Perkins — co-founder of Menlo Park, Calif.-based venture firm Kleiner Perkins Caufield & Byers — complained to other executives and to journalists about the investigation's potential ethical implications. He decried it as an invasion of privacy and asked his attorney to investigate.

His attorney, Viet Dinh, former assistant attorney general of the United States from 2001 to 2003, discovered that HP's private investigators obtained the last four digits of Perkins' social security number.

The investigator then used the information to open an on-line account with AT&T, Mr. Dinh said. Then the investigator called AT&T and impersonated Mr. Perkins, offering up his social security digits as proof of his identity, and asking AT&T to send a record of phone calls to and from his house in December, 2005, and January, 2006, to a free, Web-based e-mail account.

Although it's unclear how the investigator got Mr. Perkins' social security digits, Mr. Dinh said the tactics exposed his client — and possibly every other board member, other HP executives, journalists and others who may have been targets of the investigation — to identity theft.

In August, Mr. Dinh asked the SEC to require HP to submit a regulatory filing with details of his resignation. HP acknowledged in the filing Wednesday that the SEC's Division of Corporation Finance sent HP a letter about Perkins' resignation.

HP also disclosed in the newest filing that no recording or eavesdropping of directors' phone conversations had occurred. But the company acknowledged that its private investigators used “pretexting” of phone records, a method used by investigators to gather information by disguising their identity.

Identity thieves engage in pretexting to steal social security numbers or other confidential data under false pretenses. Pretexters may sell such information or use it to apply for credit cards or mortgages in someone else's name.

A high-ranking HP committee then hired an outside counsel to look into the matter. The counsel advised the company that the use of pretexting at the time “was not generally unlawful” but couldn't confirm that the techniques employed by the private investigators were completely legal.

Under the federal Gramm-Leach-Bliley Act, pretexting is illegal when used for identity theft — but it's unclear whether a corporation can legally pretext phone records. The Federal Trade Commission, several state attorneys general and at least one phone company — Verizon Inc., whose vice chairman and president, Larry Babbio, serves on HP's board — have filed claims against pretexters.

Based upon its internal investigation, HP's nominating and governance committee recommended that controls relating to investigations be strengthened and that management can assure that all aspects of company probes comply with laws and HP's code of ethics.

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