NEWS MEDIA UPDATE · CALIFORNIA · Confidentiality/Privilege · Dec. 8, 2006
HP to pay $14.5 million settlement in ‘pretexting’ scandal
Dec. 8, 2006 · Under a settlement approved Thursday by a California court, technology giant Hewlett-Packard Co. will establish a fund for prosecuting future privacy crimes and make changes within its corporate governance to improve the company’s legal and ethical standards.
The settlement, which was announced by California Attorney General Bill Lockyer’s office, also provides that HP pay civil penalties for its role in a boardroom leak investigation that led private investigators to obtain reporters’ phone records through a ruse.
Specifically, the $14.5 million settlement requires HP to pay $13.5 million toward a Privacy and Piracy Fund for investigations in privacy-related matters, $650,000 in civil penalties, and $350,000 to cover Lockyer’s initial “pretexting” investigation, according to a press release from Lockyer’s office.
HP will also add an independent director to its board to oversee ethical issues and establish a Compliance Council for the development of strong ethical policies, among other changes meant to strengthen the company’s ethical standards.
HP’s troubles began in January, after CNET News.com reporters Dawn Kawamoto and Tom Krazit wrote an article about the annual HP management retreat at a California resort. In that article, they cited an anonymous source who spoke about the company’s acquisition strategy and upcoming products.
Because of this inside knowledge, HP Chairwoman Patricia Dunn – who is also the subject of a criminal investigation into the matter – suspected that the source was a board member and intensified an existing private investigation into the source’s identity.
Investigators used a method called “pretexting” – calling a company and impersonating someone – to access the phone records of HP board members and the reporters who covered HP. The probe revealed that former board member George Keyworth was the source.
Reporters whose records were accessed include Pui-Wing Tam and George Anders of The Wall Street Journal; John Markoff of The New York Times; Peter Burrows, Ben Elgin and Roger Crockett of Business Week; Dawn Kawamoto, Tom Krazit and Stephen Shankland of CNET News.com; and Rachel Konrad of The Associated Press, who is Shankland’s wife.
A criminal case against Dunn, former in-house HP lawyer Kevin T. Hunsaker, and three contract private investigators involved in the probe is still pending in California state court and is not affected by this settlement.
(California v. Hewlett-Packard Co.) — ES