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HP faces a lawsuit over the departure of Mark Hurd from shareholders angry at the massive payoff he received and accusing the board of failing in their legal duties.

Hurd was allowed to resign as CEO last week after an investigation into sexual harrassment allegations uncovered false expenses claims. He walked away with a $12.2m cash payoff and and improved stock options.

HP's CFO Kathy Lesjak has temporarily taken over as CEO while the firm seeks a replacement.

The lawsuit, filed for shareholders by a Connecticut-based law firm against both HP and Hurd, alleges that "as a result of Hurd's, Lesjak's, and the HP board's shortcomings, HP lost significant credibility, and the market punished HP (and its shareholders) upon the 8/6/10 revelation of Hurd's termination - slashing its stock rating and erasing over $9 billion in market capitalization when the company's stock resumed trading on 8/9/10".

The board, mostly appointed by Hurd, is accused of gross mismanagement, waste of corporate assets, violating the California corporation code, misappropriating information, and unjust enrichment.

The plaintiff, the Brockton Contributory Retirement System, also aims to reclaim Hurd's severance package for HP, and to enforce governance changes on the board. The complaint says HP violated corporate law by failing to inform shareholders of the investigation into Hurd, who was also its chairman.

HP has declined to comment on the lawsuit. ®

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