Hewlett-Packard Chair to Step Down

The Associated Press
Wednesday, September 13, 2006; 12:43 AM

SAN JOSE, Calif. -- Hewlett-Packard reshuffled the leadership of its board of directors amid the scandal surrounding its investigation of internal leaks to the media, but the company's troubles are far from over.

California's attorney general warned for the first time Tuesday that company insiders are likely to face criminal charges.

"We currently have sufficient evidence to indict people both within Hewlett-Packard as well as contractors on the outside," Attorney General Bill Lockyer said.

He made that statement late in the day on PBS' "NewsHour with Jim Lehrer," following HP's early morning announcment that Chairwoman Patricia Dunn would step down in January and be replaced by Chief Executive Mark Hurd. Meanwhile, another director who acknowledged he was a source of leaks resigned from the board.

It was another chaotic day in a scandal that has rocked Silicon Valley's biggest and oldest technology company, led to investigations by state and federal authorities, and raised questions about one of the most powerful women in corporate America.

Dunn has admitted authorizing the investigation and she defended the need to determine who was leaking boardroom secrets to the media. But she said she was appalled that private investigators hired by the company used Social Security numbers to impersonate HP directors and journalists, then persuaded phone companies to turn over detailed logs of their home phone calls.

The ruse _ known as "pretexting" _ is commonly used by private investigators but is against the law, according to Lockyer.

"Unfortunately, the investigation, which was conducted with third parties, included certain techniques," Dunn said in a statement. "These went beyond what we understood them to be, and I apologize that they were employed."

The FBI, the U.S. Attorney for Northern California and the House Energy and Commerce Committee have requested information on HP's investigation. The Securities and Exchange Commission and the Federal Communications Commission are also investigating.

Dunn will remain on the board after giving up the top job on Jan. 18. She will be succeeded by Hurd, who is respected on Wall Street and untainted by the investigation at the Palo Alto-based computer and printer maker.

Dunn said that the probe's methods "have no place in HP."

The company's stock continued a steady climb that began not long after HP revealed details about the investigation in a regulatory filing. Shares of Hewlett-Packard Co. rose 56 cents, or 1.54 percent, to close at $36.92 on the New York Stock Exchange. The stock hit a new 52-week high of $37.25 earlier in the session.

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