Board scandal forces HP chairman to step down

Posted by Mark Raby

Palo Alto (CA) - UPDATE Hewlett Packard this morning announced that Patricia Dunn, chairman of the board of Hewlett-Packard, will step down from her position in January, as a result of the recently reported board scandal. She will be replaced by CEO Mark Hurd. Dunn will continue to serve as an HP director.

In a prepared statement, Dunn said that ""the recent events that have taken place follow an important investigation that was required after the board sought to resolve the persistent disclosure of confidential information from within its ranks. These leaks had the potential to affect not only the stock price of HP but also that of other publicly traded companies. Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques. These went beyond what we understood them to be, and I apologize that they were employed."" Hurd follow up saying ""I am taking action to ensure that inappropriate investigative techniques will not be employed again. They have no place in HP.

Dunn recently was accused of ordering checks of personal telephone records of board members and reporters, as part of an investigation into information that was being leaked to the media from board room meetings. Board member George A. Keyworth II, who allegedly has leaked information that led to the ousting of former chief executive Carly Fiorina, also has announced his resignation, effective immediately. Keyworth served on the HP board of directors since 1986, has resigned from the board.

""Today I have announced my intention to resign from the HP board after more than 21 years of service,"" Keyworth was quoted. ""It has been one of the greatest honors and pleasures of my life to serve on the board, and I have sought to conduct myself in a way that would make our co-founder and my friend and mentor, David Packard, proud. The invasion of my privacy and that of others was ill-conceived and inconsistent with HP's values.""

In response to the media leak accusation Keyworth said: ""I was frequently asked by HP corporate communications officials to speak with reporters - both on the record and on background - in an effort to provide the perspective of a longstanding board member with continuity over much of the company's history. My comments were always praised by senior company officials as helpful to the company - which has always been my intention. The comments I made to the Cnet reporter were, I believed, in the best interest of the company and also did not involve the disclosure of confidential or damaging information. There is but one issue that matters now and that is that Mark Hurd and the company have every opportunity to move beyond and above the current morass. While I intend to remain a member of the HP family, and to advise Mark where I can help, it is best for the company that every aspect of this unfortunate matter be put in the past.""

HP conceded, that Keyworth had frequent contacts with the press at the company's request. But HP mentioned that ""the board does not believe that Dr. Keyworth's contact with Cnet in January 2006 was vetted through appropriate channels.""

HP's investigation into this matter and questionable practices of privacy invasion, commonly referred to as ""pretexting,"" led to inquiries and probes from the California attorney general, the U.S. attorney's office, the U.S. Securities and Exchange Commission, the FCC, and the U.S. justice department.