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House Panel Says Pretexting Illegal, HP Defense Unbelievable

Sep 28, 2006 (03:09 PM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=193100435


Most members of a congressional panel investigating Hewlett Packard's media leak probe said during a hearing Thursday that pretexting is illegal, and they slammed HP executives for allowing the scandal.

"Some are suggesting there are ambiguities in the law," said Ed Markey, a Massachusetts Democrat. "This is absolutely absurd."

Members stated that HP's defense was unbelievable and former Board Chair Patricia Dunn's testimony was "troubling."

Markey said that the Federal Trade Commission as well as telecommunications and wire fraud laws prohibit obtaining phone records without a customer's permission and using fraud or deception to obtain them.

"What has happened to our corporate culture," he asked. "I heard nothing. I saw nothing. I knew nothing. That is their defense. It is not believable."

Kentucky Republican Ed Whitfield, who chairs the Subcommittee on Oversight and Investigations, asked whether CEO, President and now-chair Mark Hurd or Dunn oversaw the investigation.

"There's all sorts of evidence that she knew about pretexting early on," Whitfield said, adding that most of Dunn's responses indicated she could not remember or did not know about details, including an investigator's account of briefing Dunn on pretexting.

Though Dunn initiated and named the investigation and appeared to have regular contact with those conducting it, no one who testified Thursday could name the person ultimately responsible.

Dunn said she did not remember requesting details of the investigation, including methods and resources, while e-mails cited by committee members indicated investigators responded to Dunn's request for details. She said she did not recall being told about pretexting during regular briefings.

Dunn said she regretted praising investigators in an e-mail for being "clever" with a plan to pose as a disgruntled manager or executive offering a reporter a news tip to see if the reporter would go to a board member for confirmation.

"In reading that comment today, it embarrasses me," she said.

Dunn said she told investigators to run the plan by Hurd because she did not see herself as "the appropriate person to approve investigative methods."

Hurd said he could not remember any discussions about a tracer being placed in that e-mail, though Dunn remembered hearing the word. She said she did not know what a tracer was. She said she believed it would indicate where the email had been opened and claimed no knowledge that it would be tracked if the reporter forwarded it. She said that she heard from "the chatter" that the tracer did not work.

Investigator Fred Adler testified that HP had used tracers about one or two dozen times in various investigations during his three-year tenure there. Adler was one of at least two investigators to express concerns over the legality of pretexting as it was occurring.

Dunn said that she does not remember viewing a whole power point presentation addressed to her. It contained a clear outline of all of the methods investigators used -- including rummaging through trash, looking into the possibility of planting spies in newsrooms and pretexting, or lying, to obtain phone records. Dunn said that although she knew phone records were obtained and she helped provide numbers, she did not know that fraud was used to obtain them. She could not say by what means she thought they were publicly or legally available.

Dunn said she believed the people who knew the details and approved the methods were among an entire panel that waited until the last minute to invoke their Fifth Amendment rights and refusing to testify Thursday morning.

HP's former counsel Ann Baskins was among them. Her hand-written notes recapping a discussion of pretexting and noting Dunn's presence were mentioned several times during the hearing.




A review by outside counsel Larry Sonsini's firm concluded about a month ago that Dunn was "probably told" investigators "may have used" false pretenses but was always assured investigators used legal methods. Dunn disagreed with the firm's account -- compiled by a former federal investigator -- and statements an investigator made during the review of the probe. Sonsini stood by it during his testimony.

Two members of the congressional panel compared the scandal to Enron in terms of the damage it may have done to erode public confidence in U.S. corporations.

"I had the impression that this went on in an underworld of scoundrels and sleazes," said Jay Inslee, a Washington Democrat. "The thought that a major company like HP would be involved in that, never crossed my mind. That's what's so disturbing to me."

Dunn, Hurd and Sonsini said they had never heard of an investigation similar in techniques and scope in the corporate world.

Hurd and Dunn claimed they never heard about concerns expressed by HP's own investigators about whether the company was violating laws by obtaining the phone records. Those concerns were put in at least one e-mail to Kevin Hunsaker, who was HP's ethics officer and a lawyer.

When pressed about who was responsible for the legality of the investigation, Dunn named Baskins. She said Baskins relied on information from Hunsaker.

In her written testimony, Dunn said she still was not sure whether pretexting, or lying to get private phone records, was legal "as opinions vary." She also defended the investigation saying that many critics show a "profound lack of understanding" of how corporate boards work. During her verbal testimony, however, she said pretexting was wrong.

"It's fraud," she said after hours of questioning. "It's the fraudulent misrepresentation of identity. It's fraud, and I would have brought it to the attention of the chair of the auditing committee if thought fraud was involved."

Dunn said she understood the investigators doing the work had used similar methods for HP for the past eight or nine years.

"Conspicuous in its absence in your testimony is any degree of contrition," Florida Republican Cliff Stearns said, before sparring with Dunn and finally insisting that she use the word "yes" or "no" to tell whether she was responsible.

"I do not accept personal responsibility for what happened," she said.

That was in stark contrast to Hurd, who said he accepted responsibility for all aspects of the company's operations, whether or not he was consulted.

John Dingell, a Michigan Democrat, characterized the behavior as "shameful and shameless" and said shareholders would have to hold the company responsible.

During the hearing, HP's stock continued to rise. It opened at $35.20 and closed up 1.64 percent at $35.97. The company continues to face several more government investigations.