Is the strategy of pretexting an acceptable means in order to obtain critical information that will strengthen a company's internal control system? The following legal advice was obtained on the subject by HP.

Please relate to HP

source of the leak but resigned after the controversial to the not necessarily legal. scandal. Ten days earlier, George Keyworth, These tactics included using private inves the director responsible for the leak, had tigators to impersonate HP's board mem- resigned from HP's board after twenty-one bers and then to trick phone companies years of service. into handing over the calling records of those board members' personal phone Company Profile accounts. The records of nine journalists HP, founded in 1939, operates in more were similarly obtained. This technique is than 170 countries and is the world's larg- known as pretexting. With no more than a est seller of personal computers, offering a home address, an account number, or other wide range of products and services, such pieces of personal information, an investi- as digital photography, digital entertain- gator or pretexter may obtain personal ment, computing, and home printing. In information from phone companies pre- addition, HP provides infrastructure and tending be somebody else. business offerings that span from handheld devices to some of the world's most power- Resignation of Tom Perkins ful supercomputer installations. HP is The consultants discovered the origin of among the world's largest IT companies, the leak, and in a board meeting held in with revenue totaling $107.7 billion for May 2006, Patricia Dunn identified director the four fiscal quarters ended January 31, George Keyworth, the longest-serving HP 2008. In 2007, HP was ranked 14th in the director, as the alleged leaker. He apolo- Forbes 500 list. The company's corporate gized and said to his fellow directors, "I headquarters is in Palo Alto, California. would have told you all about this. Why didn't you just ask?" On September 12, Leak of Confidential Information 2006, Keyworth's public resignation letter and HP's Investigation apologizes and states his reasons for leaking Patricia Dunn joined HP's board in 1998, information to CNET: and was elected nonexecutive chair in Feb- ruary 2005. She was CEO of Barclays I acknowledge that I was a source for Global Investors from 1995 to 2002. In Jan- a CNET article that appeared in Jan- uary 2006, the online technology site CNET uary 2006. I was frequently asked by published an article about the long-term HP corporate communications offi- strategy at HP. The article quoted an anon- cials to speak with reporters-both ymous source inside HP and contained on the record and on background- information known only by the company's in an effort to provide the perspective directors. Following the CNET article, of a longstanding board member with Dunn, with the assistance of HP security continuity over much of the com- personnel and the company's counsel's pany's history. My comments were office, authorized a team of independent always praised by senior company electronic-security experts to investigate officials as helpful to the company- the origin of the leak. The investigation which has always been my intention. targeted the January 2006 communications The comments I made to the CNET of HP's directors, including not only the reporter were, I believed, in the best records of phone calls and e-mails from interest of the company and also did HP but also the records from their personal not involve the disclosure of confi- accounts. dential or damaging information. The consultants were not actually listen- Immediately following the accusations, ing on the calls. They were just looking for Keyworth left the board room, and another a pattern of contacts. The investigation director, Tom Perkins, a renowned Silicon employed tactics that ranged from the Valley venture capitalist and friend of thecompany founders, protested against the was a serious violation of our code secret internal investigation, which he con- of conduct. I followed the proper sidered illegal, unethical, and a misplaced processes by seeking the assistance corporate priority on Dunn's part. Perkins of HP security personnel. I did not was chair of the board's nominating and select the people who conducted the governance committee but had not been investigation, which was undertaken informed by Dunn of the surveillance, after consultation with board mem- even though he knew that Dunn was bers. I accepted the responsibility to attempting to discover the source of the identify the sources of those leaks, leak. but I did not propose the specific After the board passed a motion asking methods of the investigation. I was Keyworth to resign, Perkins announced his a full subject of the investigation own resignation. The next day, the com- myself and my phone records were pany publicly announced Perkins's resigna- examined along with others. Unfor- tion without disclosing the reasons for his tunately, the people HP relied upon departure. HP reported Perkins's resigna- to conduct this type of investigation tion to the SEC four days later, again giving let me and the company down. no reason for his resignation. In early August, after HP ignored his A week later, on September 28, the par- requests to take action, Perkins formally ties involved appeared at the U.S. House of asked the SEC and prosecutors in Califor Representatives Energy and Commerce nia and New York to force HP to publicly Committee Subcommittee on Oversight file his written explanation for resigning. By and Investigations. Ann Baskins, HP's gen- early September, HP could not delay dis- eral counsel, resigned hours before she was closing the scandal and made a filing to to appear as a witness and refused to the SEC, laying out the pretexting story. answer questions, invoking the Fifth At the same time, the story was released Amendment, due to the ongoing criminal to the press by Perkins. On September 12, investigations. In the hearing, Dunn and 2006, Keyworth publicly resigned from the Hurd testified extensively about the inter- board, and HP announced that Mark Hurd, nal investigation. Dunn testified she never HP chief executive officer and president, approved the use of questionable tactics, would replace Dunn as chair after the HP saying she was not aware that pretexting board meeting on January 18, 2007. could involve the misrepresentation of someone's identity to obtain phone records Congressional Hearings and until late June or July (2006). Charges In October 2006, the California attorney general filed civil and criminal charges On September 21, 2006, Mark Hurd, in an against the company, Patricia Dunn, and official HP press release, explained that other HP employees. HP settled the lawsuit "what began as an effort to prevent the in December 2006, paying $14.5 million in leaks of confidential information from fines and promising to improve its corpo- HP's boardroom ended up heading in rate governance practices. In June 2007, a directions that were never anticipated." A California judge dismissed fraud charges day later, Patricia Dunn resigned as an HP against Patricia Dunn and other employees director, stating in her resignation letter the involved in the scandal. reasons for her departure and her involve- At the same time, the journalists whose ment in the internal investigation: records were obtained by HP's external I have resigned today at the request consultants filed a lawsuit against the com- of the board. The unauthorized dis- pany. Two years later, in February 2008, closure of confidential information HP agreed to a financial settlement withthe New York Times and three Business- with respect to financial institu- Week magazine journalists. The amount tions), but such counsel could of the settlement was not disclosed, and not confirm that the techniques the proceeds were donated to charity. employed by the outside consult- ing firm and the party retained Questions by that firm complied in all 1. Should the chair of the board of direc- respects with applicable law.Spying on HP Directors In January 2006, the chair of Hewlett- journalists. They obtained phone call Packard (HP), Patricia Dunn, hired a records of HP board members and nine team of independent electronic-security journalists, including reporters for CNET, experts to determine the source of leaked the New York Times, and the Wall Street confidential details regarding HP's long- Journal, using an unethical and possibly ille- term strategy. In September 2006, the gal practice known as pretexting. Patricia press revealed that the independent experts Dunn claimed she did not know the meth- spied on HP board members and several ods the investigators used to determine the