Original URL: http://www.theregister.co.uk/2006/09/28/hp_testimony_pretexting/

'We will make more mistakes,' promises HP's CEO

Crafty plan for more promotions

By Ashlee Vance

Posted in Financial News, 28th September 2006 23:46 GMT

Close to six hours of Congressional testimony today failed to reveal much more in the way of specifics around the HP spy scandal. The marathon session, however, did make clear who has been set up to take the blame for the mess and who is ducking for cover.

Former HP employees - general counsel Ann Baskins, senior counsel Kevin Hunsaker and security chief Anthony Gentilucci - were among several witnesses that refused to testify before the House Committee on Energy and Commerce subcommittee. But that didn't stop former HP Chairman Patricia Dunn, and to a lesser extent CEO Mark Hurd, from fingering the legal and security workers as those most in the know about the leak probe. The off-loading of guilt did little to impress the Congressmen - one of which described the HP executives as having Sergeant Schultz syndrome. "I saw nothing, I heard nothing, and I know nothing."

As HP's admittedly fraudulent probe into the phone records and lives of directors, employees, reporters and their families has unfolded, Dunn has been placed as the lead fall girl. With the prospect of criminal charges looming, Dunn worked hard to erase that idea today.

"I did not supervise this investigation," Dunn said. "I initiated it at the request of the board."

As HP has stated, there were two, main leak investigations. The first started near the end of Carly Fiorina's run as CEO. HP hoped to find out which board member had leaked details of director sessions to the press. It requested the help of outside lawyer and Silicon Valley icon Larry Sonsini, who did little more than interview the directors and failed to find the mole.

It's the second phase of the investigation that has proved of more interest to the press and Congress. HP's legal and security teams took a more hands on approach to the probe, while also working with outside security consultants. As most of you know, this part of the investigation resulted in the fraudulent acquisition of phone records and in HP sending a fake e-mail laced with spyware to a reporter. The company and its consultants also debated the idea of rooting through peoples' garbage and followed some suspects.

Dunn maintains that she was placed in an awkward position where she had to approve the investigation but not interfere with its proceedings. Such distance was meant to allow the investigators to keep their methods private, so that not even Dunn would know if and how she was being probed, she said.

"At no time in any part of this investigation was I responsible for designing its methods," Dunn said. "I did not want to be, at any point, the person to whom the team turned to for decisions."

Later Dunn emphasized the point even more. "They did provide me progress reports, but I was not the supervisor of this investigation. I had no role in the management. I was focused on the results."

Dunn had three briefings about the investigation in a 13 month period. She was told at time that HP had obtained the phone records of various people and that the company planned to send a fake e-mail to a reporter. The executive claims that she thought phone records were a matter of public record and that anyone seeking someone else's call records simply had to ring a phone company and ask for them.

Perhaps Dunn has spent too much time in her ivory tower.

At times, Dunn tried to be funny and did manage to hold her own against an aggressive committee. Her performance, however, was clearly the worst of the bunch with the Congressmen expressing outrage at her testimony.

Cliff Stearns (R-FL) noted that an apology for the scandal was "conspicuously absent from your testimony."

"There is no suggestion that you will accept any responsibility and no sense that what you did was wrong," he said.

Dunn did not even try to dissuade the Congressman.

"If I knew what I know now, I would have done things very differently," she said. "I do not accept personal responsibility for what happened."

In an awkward moment, Stearns then asked if Dunn should resign as a result of the fiasco, which she has already done.

"I have done so. I can do so again, if you like," replied the vixen.

Dunn's witty retort came off as pathetic given that she had initially tried to hang on as a director of HP and only looked to cede the Chairmanship in January.

"The press reaction to all of this had become so intense that we agreed I should step down in January," she said. "The press reaction became more and more and more intense. I think finally the board decided that I was a major distraction to the company getting over this problem."

Er, yes.

And now we turn to the Hurd Gambit.

Like Dunn, Hurd has tried to distance himself from having much direct involvement in the investigation. The only major things he's copped to are having knowledge that an investigation was underway, approving the use of HP funds to pursue the leaker and okaying the content of the spy e-mail meant for a reporter. Hurd denies knowing that the e-mail contained spyware.

What's interesting is that Hurd admitted HP was "not encountering a significant number of leaks" during his tenure as CEO. And yet, it's under Hurd that HP escalated its spy investigation to unprecedented levels. We're still curious about this disconnect. Finding the leaker was a priority for HP, but neither Dunn nor Hurd really paid much attention to how the probe was being conducted and can't remember much about the investigation.

Hurd, for example, only recalls briefly attending a meeting about the probe and can't remember if he heard anything about phone fraud at the meeting. The CEO also ignored a report about the investigation.

"I pick my spots where I dive in for details," Hurd said. "This was not a place that was a priority for me."

How convenient.

To Hurd's credit, he seems to be getting better and better at crisis control. At first, he refused to speak with the press. Then, last week, he read a statement to reporters with a breaking voice. In that statement, Hurd vowed to be held accountable for fixing the scandal but did not take responsibility for the affair.

Today, while again deflecting the real blame onto Baskins, Hunsaker and Dunn, Hurd did at least admit that he failed HP in a massive way. Here's a few of the highlights.

"Not my finest hour, Mr. Chairman."

"I am accountable for everything that is sent to me."

"With the benefit of hindsight, I would not do it again."

"I agree there is a difference between legal and ethical."

"I have seen a lot of stuff in my career. I think I have probably never seen anything like this."

"I am in charge of the company. . . I am responsible for HP. Responsibility goes across the entire company including myself."

"I can understand why you are troubled by the whole thing."

"We are stopping anything that isn't appropriate or ethical in the company."

"Congressman, I will (restore HP's integrity)."

Hurd also guaranteed that "we will make more" mistakes, but the company will show its integrity by handling such gaffes well - apparently. For the first time, Hurd addressed how Bill and Dave might feel about the mess saying, "were they alive today, they would be appalled."

Congressman Jay Inslee (D-WA) chipped in by saying, "I think this hearing is peeling back a layer of an onion that is very disturbing."

You have to hate it when the disturbing onions are involved.

And now onto the final recap.

Today we learned that HP really was as dysfunctional at it seemed to be. Or at least that's the story the company wants the public to believe. Better dumb than calculating.

It has emerged that a couple of people at this company so full of integrity actually thought the fraud was a bad idea. HP's computer security investigators Fred Adler and Vince Nye warned their managers about the suspect investigatory techniques and suggested that HP could be really, really embarrassed if word of the probe tactics leaked to the press.

Of course, Dunn and Hurd deny ever hearing about such nonsense.

"The first time I learned that an employee had expressed concerns was from my lawyer this morning who had read it in the Washington Post," Dunn said.

These types of gaps in HP's story infuriated the subcommittee members. Dunn spearheaded the investigation but didn't manage it. The managers thought some things might be suspect but decided they were probably okay in the end. Hurd got tons of information on the probe, but was too busy to read it - or remember it.

According to today's testimony, HP sought only once to confirm that the "pretexting" methods being used to obtain phone logs were legal. The confirmation came from one of the companies HP hired for the investigation and was penned by a clerk.

It's remarkable to witness the supposed lack of curiosity HP executives had for how the phone records were obtained. Dunn, as reported, claims to have thought it just one of those things to have someone ring up and get your phone records. No big deal. Meanwhile, Hurd, and others, didn't hear about the pretexting until it was too late, and it took Hurd "three weeks" to fully digest that the practice might be "wrong."

The HP crowd keep pretending like pretexting/fraud is a really tough concept to digest.

In addition, they all admit that sending a fake e-mail to a reporter was unethical and that they won't do it again. At the time, however, it seemed like a fine idea to everyone. Have their moral fibers really undergone such an amazing overhaul in the month of September?

For those keeping track, HP has now lost the three board members it trusted most - Dunn, Tom Perkins and George Keyworth. It was that threesome that picked Hurd to be the company's new CEO. In addition, its lead counsel is gone, another top lawyer is gone, its security chief (Hurd said the position is open, so send your resume) is gone and its Chairman is gone.

Top all that off with Dunn's repeated finger pointing at HP veteran and CFO Bob Wayman as the man who advised her on how to handle the mole probe, and you've got a real catastrophe.

And how has Hurd been punished for mishandling the investigation and mishandling the crisis that followed? With a promotion. ®