HP's Showdown: Hurd vs. Dunn

Expect the congressional hearing to show starkly different views of how the company handled board leaks

In the drama surrounding Hewlett-Packard and how it handled an investigation into board leaks, a new rift may be emerging. This one is between HP Chief Executive Mark V. Hurd and former Chairman Patricia C. Dunn, who has borne much of the blame for a probe that's plunged HP into controversy. Differences between the two will play out publicly in a Sept. 28 congressional hearing.

In written testimony given to Congress and made public the day before the hearing, Hurd falls on his sword, apologizing for HP's (HPQ) spying on its own directors and invading the privacy of journalists.

Dunn does not.

In a 33-page written statement to lawmakers, Dunn defends every step of her decision making, explains why she at one point asked about obtaining Hurd's medical records when he was being considered for the top job, and even admonishes Congress for not creating an effective legal framework to protect companies like HP from leaks.

The contrast might have been inevitable. Just days ago, Hurd was viewed as Dunn's ally. Even as he has apologized for the tactics used by HP investigators, he has praised Dunn's efforts to improve the company's boardroom processes—including her decision to launch an investigation to isolate the leak.

And when Dunn was ousted by a unanimous board on Sept. 21, there were "hugs and tears," according to one source, with Hurd commenting that Dunn had to go—not because of the leak investigation, but because she had become a "distraction."


  But at a press briefing the next day, Hurd blamed Dunn for starting the investigation. At that briefing, Morgan Lewis' Mike Holston, a lawyer hired by HP to investigate the leak probe, made a statement. He said that Dunn contacted Security Outsourcing Solutions, a firm run by Ronald DeLia, in early 2005. He also said that for the first month or so of the investigation, Dunn "worked directly with Ron DeLia from SOS" and didn't bring in HP's Global Security team until two months later. Dunn hints that it was far less nefarious than that, saying she did not seek out an investigator, but simply used SOS because DeLia's firm was on retainer with HP.

Hurd also is said to be concerned that Dunn, working with SOS, may have gone beyond the routine background checks that are done on virtually all high-ranking executives before they are hired in corporate America. Specifically, he is concerned that she sought to obtain medical records of the 49-year-old Hurd.

In her written statement to Congress, Dunn states that in a Mar. 23 conversation with DeLia, she asked "whether there were any medical issues that could interfere with Mr. Hurd's ability to carry out his responsibilities" as CEO.

HP General Counsel Ann Baskins, who oversaw the phone records inquiry, was also invited to appear before the subcommittee. Baskins resigned from HP on Sept. 28 and will not testify, invoking the Fifth Amendment, her attorneys said in a letter dated the same day. The lawyers stress that Baskins was assured by HP Senior Counsel Kevin Hunsaker, who has also departed HP, that the tack was legal. "Ms. Baskins always believed that the investigative methods that she knew about were lawful, and she took affirmative steps to confirm their legality," the lawyers write.


  When DeLia responded that doing so would require a court order, it signaled to Dunn that "DeLia conducted his business in the fully above-board manner that I would expect of any long-time employee or contractor to HP." Why her interest in Hurd's medical records? One possibility: she was an executive at Barclays Global Investors when Michael O'Neill, CEO of parent company Barclays PLC, quit one day into the job due to health problems.

Calling the HP saga her "worst nightmare," Dunn also takes Congress to task for not giving corporations the tools to defend themselves against damaging leaks. "I hate to think that any chairman or director of a public company would ever face the problem I faced with the result that has ensued," Dunn says. She urged Congress to consider legislation to give companies such as HP "legitimate and sanctioned ways of pursuing their responsibilities to protect their intellectual property and confidentiality."

Dunn will get the chance to test that admonition, and Hurd will get the chance to try to begin putting the scandal behind HP before a roomful of restive legislators on Sept. 28.

Editor's Note: Burrows is one of the reporters whose private phone records were sought by investigators for Hewlett-Packard.

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