HP's Boardroom Shake-Up Bad News for Shareholders

Sept. 7, 2006 — -- The news that California is investigating questionable tactics by Hewlett-Packard's board of directors has already hurt the company's shareholders.

In Wall Street trading, shares in the 11th-largest company in the Fortune 500 took a dip last week following months of political infighting among the board's members. The stock slip and subsequent inquiry by the U.S. Attorney's office raises the question of whether the HP brain trust has sacrificed shareholder interest in favor of personal grudges.

California Attorney General Bill Lockyear issued subpoenas in a bid to determine whether the computer maker may have used illegal means to investigate leaks to the media believed to have come from an HP board member in 2005.

Lockyear said the investigation was still "in the early fact-finding stage" but did not rule out criminal charges.

In a filing with the Securities and Exchange Commission, Hewlett-Packard disclosed it had sought the private telephone numbers and telephone billing accounts of board members in its leak investigation.

Private investigators are accused of using the possibly illegal procedure of "pretexting" -- an investigative technique in which someone poses as another person to gain private information.

An attorney involved in the case told The Associated Press that outside investigators hired by Hewlett-Packard had used the final four digits of board members' Social Security numbers to set up accounts with telephone companies and then gained access to individual board members' bills.

Pretexting, consumer groups say, is the same tactic used by identity thieves.

At issue was whether one or more board members had leaked to the news media some details of the board's action in ousting CEO Carly Fiorina in 2005.

The then-new board chairwoman, Patricia Dunn, was dissatisfied -- as were shareholders -- with HP's stock performance during Fiorina's time at the company.

Dunn was heading the board when HP hired a private investigation company to discover the source of the leak.

That investigation led to the pretexting controversy, which angered other board members and incited one, Thomas Perkins, to quit the board.