Calif. Investigates Legality of HP Probe

Hewlett-Packard Company's Patricia Dunn speaks during a news conference about new HP new CEO Mark Hurd at HP headquarters in Palo Alto, Calif., Wednesday, March 30, 2005. Dunn, one of the most powerful women in corporate America and the chairwoman of the 11th largest company on the Fortune 500. She oversaw the ouster of former HP CEO Carly Fiorina in February 2005 and the hiring of Mark Hurd as her successor. Now she may be the next one to leave the Palo Alto, Calif.-based company after overseeing an unusually invasive and legally questionable investigation into a media leak among the computer maker's board of directors. (AP Photo/Paul Sakuma) (Paul Sakuma - AP)

Keyworth's departure comes after a January article on CNET Network Inc.'s News.com, which included a quotation from an anonymous HP source who described a gathering of HP directors at a posh spa in Southern California. Although the source didn't leak high-level strategic detail or say anything inflammatory, the statement angered Dunn, who has been on the board for eight years.

At a board meeting in May, Dunn identified Keyworth as CNET's source, as well as that of other leaks dating to early 2005. The board asked Keyworth, 66, to resign, but he refused.

The investigation and attempted ouster riled another board member, Tom Perkins, 74, who resigned and stormed out of the May 18 meeting.

In the months since his resignation, Perkins _ co-founder of Menlo Park-based venture firm Kleiner Perkins Caufield & Byers _ complained to other executives and journalists about the investigation's ethical implications.

His attorney, Viet Dinh, a former assistant U.S. attorney general, says he discovered that one of HP's private investigators also obtained the last four digits of Perkins' social security number.

The investigator used that information to open an online account with AT&T, Dinh said. The investigator then called the telephone provider and impersonated Perkins, offering up his social security digits as proof of identity and asking AT&T to send a record of phone calls to and from his house in December 2005 and January 2006 to a free, Web-based e-mail account.

Perkins was unavailable for comment but issued a statement through his lawyer.

"Despite this current disagreement, Tom Perkins has a warm place in his heart for HP and believes in the prospects and performance of HP under the leadership of Mark Hurd," Dinh said.

Dunn, 52, resigned as CEO of Barclays Global Investors in 2002 to battle breast cancer and melanoma, but she's taken an active role as chairwoman of HP, the 11th largest company on the Fortune 500.

She was one of the board members who hired Fiorina in 1999, but Dunn became disillusioned after years of lackluster stock performance and, in December 2004, wrote a four-page report to Fiorina detailing her concerns.

Dunn announced Fiorina's resignation in February 2005, and two months later introduced Hurd, who was favored by Keyworth and Perkins, among others.

She majored in economics and journalism at the University of California, Berkeley, and worked as a freelance journalist before joining Barclays as a temporary secretary.

Dunn had reportedly grown increasingly upset over HP's leaks to journalists.

Bruce Oliver, professor and director of the Center for Business Ethics at Rochester Institute of Technology, said Dunn had the right to seek out the source of leaks because board members often sign nondisclosure agreements. But she crossed an ethical line in going after the home phone logs, Oliver said.

"To engage in some activity where you're hiring someone to do something on the QT where they're misrepresenting themselves, that's over the line of what constitutes ethical behavior," he said.

Others said the scandal could erode morale on HP's Palo Alto campus.

"This sends a message to employees that the company is willing to do just about anything to protect itself," said John W. Dienhart, business ethics professor at Seattle University. "This sends a bad message to existing employees, and it's bad for attracting good employees from outside the organization."