Let’s review how HP got to the point where Congress is joining an investigation that already involves criminal probes by the California attorney general and at least two U.S. attorneys, as well as inquiries by the Securities and Exchange Commission, the FTC and FCC. The story, first reported Sept. 5 on NEWSWEEK.com, grew out of HP’s long-held obsession with determining who, if anyone, on its board of directors was leaking confidential information to the media. Patricia Dunn, the board’s chairwoman, spearheaded an investigation that was led by the general counsel’s office of the company. That office in turn outsourced much of the leaks investigation to various security firms and private investigators. The investigation employed various tactics that ranged from the controversial to the not-necessarily-legal.

The tactics included using private investigators to impersonate board members and then to trick phone companies into handing over the calling records of those board members’ personal phone accounts. The records of journalists were similarly hacked (or, “pretexted,” as the telecom lexicon goes). With those records in hand, the investigators could quickly determine the identity of the likely HP leaker. Some directors and journalists were also followed by investigators, and at least one reporter was sent “tracer” software in order to try monitor e-mail communications.

The investigations, such as they were, bore fruit. Director George (Jay) Keyworth was identified at a May 2006 board meeting by Dunn as the alleged leaker. (Keyworth staunchly maintains he disclosed no confidential information, and the company has backed away from calling him a leaker in recent days.) But that step set in motion the current scandal. Director Tom Perkins, a prominent Silicon Valley venture capitalist, quit the board immediately in protest and agitated for the next 10 weeks for the company to disclose his reasons for resigning—and thereby bring to light the company’s surveillance scheme. That finally happened Sept. 5. Thereafter, Dunn announced she would step down as chairwoman in January, to be succeeded by Mark Hurd, the current CEO (who would remain as CEO, as well). Keyworth, who had previously declined the board’s demand that he resign, also agreed to step down. The California attorney general took the lead in announcing criminal probes, and for two weeks now, has hinted at imminent indictments—including, possibly, of HP itself.

Hurd was able to stay above the fray for only days, as e-mails became public—through leaks, of course—that showed he was more involved in the Dunn-orchestrated investigation that previously thought. Last Friday, at a press conference, Hurd offered bits and pieces about his contemporaneous knowledge and involvement, but declined to take questions because, HP said, it did not want to pre-empt any questions from Congress this week. Hurd also announced that he would become chairman immediately (staying on as CEO, as well) and that Dunn was out. Throughout it all, apart from a 5 percent decline in HP’s stock price last Thursday when Hurd’s involvement became known, HP’s bottom line has not been affected by the scandal. Wall Street and Silicon Valley insiders attribute that to Hurd’s reputation and the performance he’s demonstrated since becoming CEO at HP in early 2005.

What to expect at the hearings Thursday and Friday (which will be Webcast from Congress, as well as available on one of the C-SPAN channels)? Herewith, a playbook for viewers:

Who’s testifying? Nine witnesses are scheduled, including Dunn and Hurd. They are the key players, as are Larry Sonsini and Ann Baskins. Sonsini is HP’s outside counsel and Silicon Valley’s heaviest-hitting corporate lawyer. Baskins is HP’s general counsel—its main lawyer on staff; it was her office that had a central role in conducting the leak investigation. Congressional interrogators will want to ask those two traditional killer questions: what did you know and when did you know it? Or in a scandal where participants may claim not to have known what was going on, the questions may be: what didn’t you know and why didn’t you know it? That’s a key inquiry, because if any participant willfully turned a blind eye-the better not to know-prosecutors could use that as a basis for indictment.

Who are the other five witnesses? Representatives of some of the outside consulting firms retained by HP, along with former HP employees (“former” because their employment reportedly ceased this week). Congressional officials expect that three of these witnesses—Kevin Hunsaker, HP’s former senior counsel and chief ethics officer; Anthony Gentilucci, HP’s former security chief, and Ronald DeLia, one of the private investigators HP retained—are expected to plead the Fifth Amendment, which allows them not to answer on the grounds they may incriminated themselves.

What happens if any witnesses taking the Fifth are granted immunity? It gets tricky, but the bottom line is that you have to answer questions if you’re granted immunity. No one at this point is suggesting any grants if immunity are likely. But if they happen, a potential loser is any prosecutor, who might then be forced to show that he indicted someone based on information unrelated to the immunized testimony. (Generally, a prosecutor cannot use immunized testimony even indirectly to obtain incriminating evidence.) California’s A.G. reportedly has been in contact with House staffers imploring that no grants of immunity be given that might impede his probe.

What should we listen for from reps of the consulting firms or subordinate HP employees? The key question is whether they’ll implicate higher-ups. Surely they will have been advised by counsel that Congress and prosecutors are most interested in landing the biggest fish in the pond. But by pointing the fingers at others, they may be implicating themselves in the process. It’s a tightrope.

Where’s Keyworth? Good question. He wasn’t asked to testify. Presumably, the House’s inquiry is focused on HP’s methods and not the underlying leaks that motivated Dunn. But don’t think we’ve heard the last from Keyworth.

Are any fireworks expected? It’s anybody’s guess, but several HP insiders have speculated that Dunn may go on the warpath in defending the goals of the leaks investigation. She had acknowledged that the means HP used—pretexting, spying, following people around—were excessive, but she has never stepped back from the ends she had in mind. And now that she has been rather unceremoniously dumped as chairman of the board—less than two weeks after the board agreed she would stay on until January—she may feel that she’s a lone wolf whose siren cry against boardroom leaking needs to be heard.

Well, why she was shown the door? She hasn’t said. Nor has HP. It would be a good question for House members to ask at the hearings. The fact of her departure was slipped into the middle of Hurd’s press conference last week. And since he took no questions at the event—it was less “press conference” and more “press transcription”—Hurd has not been forced to answer such unpleasant questions.

Care to speculate? It may be that HP—or Dunn herself—concluded that she had become a distraction. Or it may be that her involvement in the leaks investigation may have been even more central than it now seems and that Hurd and the rest of the board lost confidence in her. Regardless, though, she may well feel abandoned by the board and may view her congressional testimony as her last, best chance to set the record straight.

What is Hurd’s agenda at these hearings? After all, unlike Dunn, it was he who volunteered to come to Washington to testify. Hurd faces the biggest challenge. He’s no ex-chairman and no ex-employee. He’s running the company ranked 11th in the Fortune 500. Wall Street desperately wants him to succeed. Almost nobody with any knowledge of HP’s numbers, internal organization or strategic plan believes the company can thrive at this moment without Hurd’s leadership. And yet, if Hurd’s involvement in the scandal ever reached the point of leading to possible criminal culpability—which no prosecutor has even remotely intimated—then it’s hard to see how he could continue on. For the moment, his mission before Congress is to appear open and forthcoming. Remember, at the press conference, he took no questions. He’s yet to be subject to any interrogation. House members may well want to press him on so many of the details he left out at his press conference: Why wasn’t he more interested in the leaks investigation that he knew Dunn was obsessed with? At what point did he learn that HP’s outside consultants had obtained personal phone records of HP employees and how quickly did he ask just how could such personal records be obtained legally? At the May board meeting when Dunn announced to the board that it had been spied on—and Perkins quit in protest on the spot—what did Hurd have to say about the matter? If he said nothing, why? Has he now retained his own lawyer, separate and apart from HP counsel? Does he know if he himself had his phone records hacked? In short, the biggest moment of Hurd’s HP career may be these hearings.

Congress is GOP controlled. Congress likes big business. Is there some irony in these hearings being spawned by Republican congressmen? Sure. But never underestimate the need to grandstand taking precedence over political loyalty. That said, there are indeed many bills before Congress dealing with pretexting, confidentiality, privacy, and the sale of Social Security numbers to private investigators (which may have helped consultants pretext HP directors in this case). This is the kind of hearing that could spur House action.

title: “11 Questions About The Hp Scandal” ShowToc: true date: “2022-12-25” author: “James Shannon”

All of that is surely disheartening to HP, which Tuesday announced a shakeup designed to mend the company and steer it away from the scandal. Company chairwoman Patricia Dunn will leave her post in January; the current CEO, Mark Hurd, will then replace her as chairman; and George (Jay) Keyworth, the leaker Dunn sought to root out, resigned immediately. And the company apologized to Tom Perkins, the HP director who resigned when Dunn first revealed her spying operation to the board and who then agitated for HP to make the reason for his resignation public. Still, the news that the company hired private investigators to spy on its own directors—as well as journalists—will not be quickly forgotten. Yes, HP remains secure in the iconography of Silicon Valley—the high-tech company born in a garage, whose “HP Way” practiced egalitarianism and civility that became the benchmark for every start-up that followed. But the question is how much—and for how long—the current controversy will tarnish that status. That, in large part, will depend on prosecutors. Herewith, 11 big questions about the corporate-spying furor:

  1. Why did California Attorney General Bill Lockyer recently tell an interviewer that his office had “sufficient evidence to indict people both within Hewlett-Packard as well as outside”? After all, just last week, Lockyer said that, while he had concluded that a crime was committed, he remained unsure if any individuals would be prosecuted.

One explanation is the A.G. simply meant what he said. Another may be that he’s engaged in a tactical ploy. Sources with knowledge of different government investigations tell NEWSWEEK that various officials at HP have retained independent lawyers and that those officials have told investigators their clients will not be answering questions for the moment. That kind of “lawyering up” seems at odds with HP’s stated promises this week to “cooperate” with state and federal probes. But it may be that HP officials, concerned about possible criminal prosecution, have concluded that cooperation is not the wisest course at the moment. By issuing a public statement about imminent indictments, the A.G. may be trying to pressure HP officials to break their silence. An HP spokesman declined to comment and also declined to confirm which, if any, HP officials may have been contacted by government investigators.

  1. Who’s the loser in all this?

It depends on whom you ask, but most observers agree it’s Dunn, the chairwoman, who has agreed to step down from that position in January, even though she’ll continue as a director. Even as she has apologized for HP being involved in hiring private investigators who impersonated directors and journalists in order to get their personal phone records, she has defended her motivation to root out leakers from the boardroom. In attempting to separate out her ends from the means, she has given the impression she still doesn’t understand the seriousness of the hacking of private phone records.

  1. Is Dunn a target of prosecutors?

Prosecutors decline to name any targets, but she surely would be a primary person of interest. The question is not only, “What did she know and when did she know it?” Prosecutors also want to know if she intentionally turned a blind eye: “What didn’t she know and when didn’t she know it?” In addition to possibly charging Dunn, prosecutors could target the general counsel of HP, Ann Baskins, or other lawyers in that office who may have supervised the contractors who hacked personal phone records of directors or journalists. And the company itself could be indicted; while a corporate entity can’t be sent to prison, it can be subject to hefty fines.

  1. Why was Dunn allowed to continue on the board of directors?

It was part of a compromise. She saves face by getting to stay on as chairwoman through the end of the year and then also remaining as a director until March 2007. But don’t expect her to be running for re-election to the board at that time.

  1. Any winners?

Mark Hurd, the CEO. He gets to handle the day-to-day operations of the company for the four months while Dunn remains in the center of the vortex. If someone has to testify in Congress, for example, Hurd will be all too happy to let Dunn do it. By the time he becomes chairman in January, there will likely be less glare on HP. He will continue to be CEO after becoming chairman.

  1. What was Hurd’s view about the spying on directors, which presumably included himself?

In statements earlier this week, Hurd assailed those activities and distanced himself from what the company’s contractors had done. But a key open question is what Hurd said back in May when Dunn first revealed to the board of directors that her investigators has obtained the personal phone records of directors.

  1. What happened in that boardroom on Sunday and Monday? Why did it take so long?

The HP board remains fractured. According to sources close to HP who requested anonymity given the sensitivity of the information, some directors wanted Dunn to soldier on, while others wanted an immediate resignation. The deal allowing Dunn to continue as chairwoman through the rest of the year was part of a carefully negotiated settlement that also involved the immediate resignation of Jay Keyworth, the director who anonymously gave information to a CNET reporter back in January; it was that leak that launched Dunn’s investigation that led to the most recent hacking of phone records.

  1. He’s no longer a director, so why did Tom Perkins get his apology? What leverage did he have?

Perkins, like Keyworth and other directors, could sue the company for invasion of privacy and related civil claims. Keeping him happy—and apologizing to him in a statement—were in HP’s interests. And he still has supporters in the boardroom, even though the scandal became public in large part due to his behind-the-scenes actions.

  1. Press accounts have said that Perkins wanted back on the board. True?

Perkins denied this in an interview with NEWSWEEK.

  1. Is there not rich irony in that the leaks out of the HP boardroom seem to have continued in the press unabated?

Yes. But that says less about HP than it does human nature. When many people in a controversial situation know something, at least some of them will invariably talk to the press at some point. Sometimes they do it to promote personal agendas; sometimes they do so because they believe shareholders or the public really ought to have the information; sometimes they want to correct what regard as bad information already out there in the journalistic marketplace. That’s just how it works.

  1. OK, my HP printer is jammed. Does the current controversy make it more or less likely someone at customer support will be able to help me?

It doesn’t matter one way or the other. As important as the scandal is as a touchstone for evaluating corporate regard for privacy, as well as a look into the dysfunctional culture of the HP boardroom, it means little to the day-to-day functioning of the company or its continuing ability to thrive. HP stock has not yet suffered since the scandal broke and few expect Hurd to be distracted, at least while Dunn continues as chairwoman of the board for the rest of the year.