Hewlett-Packard's pretext for lying

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Has Donald Rumsfeld been running Hewlett-Packard? The unfolding boardroom scandal at the tech giant sounds like one of the Pentagon brawls between the autocratic defense secretary and his equally hard-nosed generals: There's a big dispute over strategy. A dissident unhappy with the organization's decisions leaks his gripes to the press. That triggers a witch hunt, complete with shady tactics that raise tensions to the boiling point. The ensuing protest resignation of a senior official is papered over with world-class euphemisms and obfuscation.

Then, of course, the whole ugly affair blows up in public view, forcing the people in charge to come up with creative explanations for decisions that suddenly look pretty bad.

The story is somewhat complex, but readers should take advantage of a few documents, available on the Web, that offer an unusually candid view of the kind of boardroom drama that usually stays behind oak-paneled doors.

The starting point was a series of disagreements between the HP board and management over certain strategic issues. Somebody present at a number of confidential board meetings began leaking his disagreements to news outlets such as CNET News. That infuriated HP leaders, including former CEO Carly Fiorina and current Chairman Patricia Dunn. The company hired an investigative firm to track down the phone records of its directors, to figure out who might have been talking to the press.

To get those records, investigators called up various phone companies and carefully explained who they were and what they were doing, and asked if they could have access to other people's phone records they had no right to see. Wait — that's not what they did! That wouldn't be very effective, because the phone companies would say no, you're not entitled to see somebody else's private information.

So the investigators "pretexted" — they pretended they were somebody else. Evidently the word lying lacks the proper shading or texture to describe this practice, and of course the investigators are professionals with their own unique techniques and lexicon. Maybe they even attend a pretexting class as part of their training. HP offers a very helpful explanation of pretexting in the must-read 8-K form that it filed with the Securities and Exchange Commission this week.

The tactic worked. Except that board members began to discover that the company they were serving was delving into their personal information without approval. There was a big fight over this, which former board member Tom Perkins, who resigned over the dispute in May, outlined in a letter he recently sent to HP. Perkins also included information he got from AT&T, which at his request did its own inquiry into whether Perkins' phone records had been retrieved by a third party. That alone is fascinating reading for anybody interested in the mischief made possible by the Internet.

Perkins, who had been involved with HP for 50 years, resigned from the company's board in May for one reason: He was disgusted by the company's handling of the leak issue. There was no hint of that in the company's announcement of his resignation. CEO Mark Hurd offered only the usual glad-handing, thanking Perkins for his "service and dedication," etc.

But federal law requires companies to disclose any significant information regarding the departure of officers or board members. HP didn't do that, the company has now explained, because Perkins "did not provide any written communication to HP concerning the reasons for his resignation." He had complained strenuously at a May 18 board meeting, but he never bothered to jot down his objections, so they didn't count. And evidently the stenographer taking the minutes of the board meeting was hard of hearing, because Perkins's objections were never written into that account either — an oversight he spent all summer trying to correct, as his letter indicates.

Perkins, a legendary and longtime venture capitalist who doesn't need to kowtow to HP's management, finally went public-the inevitable last resort for determined do-gooders who don't get results inside the system. So now HP has a lot of explaining to do. The California attorney general wants to know if HP's investigative tactics were illegal, and the SEC is looking into whether HP illegally withheld material information regarding the investigation and Perkins's resignation. There could be civil lawsuits too.

But most important-the HP investigators finally nabbed their man! Phone records revealed that director George Keyworth had indeed leaked some information to the press. Surely HP investors, employees, and customers are relieved that the company took care of that problem.

--Rick Newman

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  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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