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FAQ: HP board scandal

FAQ: HP board scandal

While HP has been buoyed by rising financials, the tide has turned in recent days as the industry focuses on a boardroom scandal involving the board chairman, an outside investigative firm and a technique known as "pretexting." What follows are answers to some frequently asked questions about the latest situation at the company.

How did all this surface?

In an U.S. Securities and Exchange Commission filing (http://investor.hp.com/EdgarDetail.cfm?CIK=47217&FID=1104659-06-59471&SID=06-00) made public last week, HP says that it conducted an investigation of its own board following repeated leaks of confidential company information to various media outlets. In the filing, HP acknowledged that an outside investigative firm may have used "pretexting" in order to gain access to reporters' phone records.

What is pretexting?

Pretexting is a technique in which investigators disguise their identities in order to obtain information. In this case, the investigators allegedly pretended to be journalists.

Is pretexting illegal?

Today, there is no law specifically outlawing pretexting, although it is illegal to gain financial information via false pretenses (http://www.ftc.gov/bcp/conline/pubs/credit/pretext.htm). The Federal Communications Commission, the Federal Trade Commission and the House Energy and Commerce Committee are among the organizations investigating pretexting.

Why is HP Board Chairman Patricia Dunn stepping down?

Dunn has been under great pressure to step down since it was revealed last week that the board-led investigation may have used inappropriate tactics.

When is Dunn stepping down and who will replace her?

Dunn is stepping down after HP's Jan. 18 board meeting. HP CEO Mark Hurd will replace Dunn as board chairman.

Is Dunn or any other board member facing charges?

Federal authorities, including the House Energy and Commerce Committee, are questioning the processes used in the investigation. California Attorney General Bill Lockyer also is conducting an investigation and says charges are likely to be filed.

Is Dunn the only board member to step down?

No. Dunn is actually staying on the board as a director, but board members Tom Perkins and George Keyworth have resigned their board positions. Perkins stepped down in May in protest over the investigation into media leaks. It was his complaints that prompted a subsequent inquiry into methods used in that investigation. Keyworth was pinpointed as a source of the leaks in May, but refused to step down at that time. He resigned on Tuesday, effective immediately.

Should HP customers care about this?

Industry experts say customers should keep an eye on how HP handles the situation. While lengthy investigations could mean trouble if HP's focus is forced away from its primary business, a strong commitment to products and customer service should help things remain business as usual. Removing Dunn as chairman of the board, as well as Keyworth's resignation, indicate that HP is aiming to move past the scandal as quickly as possible, experts say.


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