Transcript

House Hearing on the Hewlett-Packard Pretexting Scandal

CQ Transcriptions
Thursday, September 28, 2006; 7:27 PM

HOUSE COMMITTEE ON ENERGY AND COMMERCE: SUBCOMMITTEE ON

OVERSIGHT AND INVESTIGATIONS HOLDS A HEARING ON THE

HEWLETT-PACKARD PRETEXTING SCANDAL

SEPTEMBER 28, 2006

SPEAKERS:

U.S. REPRESENTATIVE ED WHITFIELD (R-KY) CHAIRMAN

U.S. REPRESENTATIVE CLIFF STEARNS (R-FL)

U.S. REPRESENTATIVE CHARLES "CHIP" PICKERING JR. (R-MS)

U.S. REPRESENTATIVE CHARLES BASS (R-NH)

U.S. REPRESENTATIVE GREG WALDEN (R-OR)

U.S. REPRESENTATIVE MIKE FERGUSON (R-NJ)

U.S. REPRESENTATIVE MICHAEL BURGESS (R-TX)

U.S. REPRESENTATIVE MARSHA BLACKBURN (R-TN)

U.S. REPRESENTATIVE JOE BARTON (R-TX) EX OFFICIO

U.S. REPRESENTATIVE BART STUPAK (D-MI) RANKING MEMBER

U.S. REPRESENTATIVE DIANA DEGETTE (D-CO)

U.S. REPRESENTATIVE JANICE SCHAKOWSKY (D-IL)

U.S. REPRESENTATIVE TAMMY BALDWIN (D-WI)

U.S. REPRESENTATIVE JAY INSLEE (D-WA)

U.S. REPRESENTATIVE HENRY WAXMAN (D-CA)

U.S. REPRESENTATIVE JOHN D. DINGELL (D-MI) EX OFFICIO

U.S. REPRESENTATIVE C.L. (BUTCH) OTTER (R-ID)

U.S. REPRESENTATIVE EDWARD J. MARKEY (D-MA)

U.S. REPRESENTATIVE ANNA G. ESHOO (D-CA)

WITNESSES:

MARK HURD,

CHAIRMAN AND CEO,

HEWLETT-PACKARD

PATRICIA DUNN,

FORMER CHAIRMAN,

HEWLETT-PACKARD

ANN BASKINS,

GENERAL COUNSEL,

HEWLETT-PACKARD

KEVIN HUNSAKER,

SENIOR COUNSEL,

HEWLETT-PACKARD

ANTHONY GENTILUCCI,

GLOBAL SECURITY MANAGER,

HEWLETT-PACKARD

FRED ADLER,

COMPUTER SECURITY INVESTIGATOR,

HEWLETT-PACKARD

LARRY SONSINI,

OUTSIDE COUNSEL,

HEWLETT-PACKARD BOARD OF DIRECTORS

JOE DEPANTE,

OWNER,

ACTION RESEARCH GROUP

RON DELIA,

OPERATOR,

SECURITY OUTSOURCING SOLUTIONS INCORPORATED

BRYAN WAGNER OF LITTLETON, COLO.

DARREN BROST OF AUSTIN, TEX.

CHARLES KELLY OF CAS AGENCY,

VILLA RICA, GA.

CASSANDRA SELVAGE,

EYE IN THE SKY INVESTIGATIONS,

DADE CITY, FLA.

VALERIE PRESTON OF INSEARCHOF INC.,

COOPER CITY, FLA.

[*]

WHITFIELD: Today the Subcommittee on Oversight and Investigations will examine how and why Hewlett-Packard Company, one of America's largest technology companies, used pretexting and other nefarious practices as part of an internal corporate investigation.

This subcommittee has been examining the practice of pretexting for the past eight months.

To be clear, pretexting means using fraud, deceit and impersonation to acquire someone's personal records without his or her consent.

The relative ease with which unscrupulous pretexters can obtain private information is cause for great concern.

During our hearings, we heard testimony from witnesses who were unsettlingly proficient in obtaining personal information regarding phone calls, bank accounts, credit card charges and other information without the consent of the person from whom information they obtained.

We also discovered that pretexting is commonly used for investigation purposes, as well as for the purposes of identity theft. And we heard testimony how it was used frequently by the national news media.

Hewlett-Packard has long been one of the most admired companies in America. Consequently, people were really shocked to learn a few weeks ago that a company of this stature would resort to such tactics in an effort to identify the source of boardroom leaks.

Pretexting for phone records, physical surveillance, monitoring of e-mail were all part of the plan. H.P.'s investigative team even tried to plant, or discussed planting, of electronic tracing software into a reporter's e-mail account, and even considered planting undercover spies in several newsrooms.

While there's nothing objectionable on its face about Hewlett- Packard trying to determine the source of leaked confidential information, the methods used were clearly unacceptable.

Obtaining private call records by pretexting is an invasion of privacy and probably is illegal.

For over a year, the most senior levels of management at the company were designing and directing the investigation. This isn't a case of some out of control and overzealous contractor who was hired to conduct a search for a leaker.

WHITFIELD: Rather, this investigation was led by the chairman of the board, Patricia Dunn; the company's senior legal counsel, Ann Baskins. And the day-to-day operations were overseen by, of all people, the company's chief ethics lawyer, Kevin Hunsaker.

We hope to get a better understanding today why no one among this group of very smart and experienced people had the good sense and courage to say, "Stop. This may be illegal, and at the very least it's not the way we should be doing business."

And how, after all was said and done, could the board's outside counsel, Mr. Larry Sonsini, review the investigation and say that pretexting for phone records of board members, employees and journalists was above-board and legitimate?

Further, I give little credence to the argument that H.P. was unaware that its outside consultants were inappropriately gaining access to confidential telephone records. If there are legitimate ways to obtain someone's private records without their consent short of a subpoena, I'd be interested in knowing what they are.

Our hearings this past June demonstrated that there are really none. And testimony from the FBI suggested that the Federal Wire Act may be implicated by pretexting.

It is the company's responsibility to know what those operating on its behalf are doing and how they're doing it.

If you turn to the first page of the Hewlett-Packard "Standards of Business Conduct," it reads, "Hewlett-Packard conducts its business with uncompromising integrity. Every member of the Hewlett-Packard community -- directors, executives, managers, employees and business partners -- have a duty to comply with all applicable law and adhere to the highest standards of business ethics."

It appears that they fell short this time.

The committee began its oversight work of the Hewlett-Packard matter just a short time ago, on September the 11th. We moved aggressively to learn as much of the facts as possible and to hold this hearing and share the information with the American people.

Our pace meant reviewing tens of thousands of documents in very short order. And I would like to commend Hewlett-Packard for doing everything in its power to cooperate fully and completely with the committee's investigation on our schedule to ensure that this hearing was productive and we had all the information.

I want to thank you for that.

WHITFIELD: At this time, I'd like to recognize the ranking minority member, Ms. DeGette of Colorado, for her opening statement.

DEGETTE: Thank you very much, Mr. Chairman.

And, Mr. Chairman, I bring Mr. Stupac's apologies for not being here. He's at a funeral today.

I would also ask unanimous consent to put my full statement and the statements of Mr. Stupac and other committee members in the record.

WHITFIELD: Without objection.

DEGETTE: Thank you so much, Mr. Chairman.

Mr. Chairman, over the last few years, this committee has looked at major corporate scandals in this country like Enron and WorldCom. I was privileged to serve on this committee during those hearings as we helped shine a light on corporate access and pave the way to reform.

One thing I found at the end of the first series of hearings was that we left issues of board accountability on the table. And I think it's important as today we continue this committee's oversight role in looking at issues of corporate accountability and, in particular, board accountability.

Today, as we continue our series of hearings on pretexting, this time in the corporate context, this gives us a good opportunity to open the window to some of the practices that are going on in corporations around the country.

Corporate context of pretexting that we're talking about today, of course, involves Hewlett-Packard. It's a sad day for this proud company and I've been sad to see all the witnesses, the fine corporate representatives, who one by one have announced their intentions to exercise their Fifth Amendment rights, although I've got to say, given the facts, I don't blame them.

H.P. is a company of iconic status in the U.S. and around the world, and, frankly, looking around this committee room, Mr. Chairman, there are many products that we're using today that bear the H.P. logo.

This company was started in a small garage in Silicon Valley and grew to be one of the nation's largest employers.

DEGETTE: And so we know how proud so many are about what Hewlett-Packard became over the years.

But something has really gone wrong at this institution. And one of the questions I want to ask today: Is it just with this institution, or is it endemic through corporate America that the kinds of excesses that we will hear about and that we've seen in the voluminous documents and the interviews are going on throughout corporate America?

Mr. Chairman, this hearing really is more about than sorting through the mess that has sullied Hewlett-Packard. It's more than about how the Hewlett-Packard way became synonymous with digging through people's trash, setting up bogus e-mails, which were approved at the highest levels of the company, and stinging unsuspecting reporters. And it's more than about how a computer company suddenly found itself in the business of trailing and photographing board members across the globe or surveilling journalists using ex-FBI agents who sat in cars and watched as if their subjects were busy making truck bombs.

As I reviewed all of the documents for this hearing today I felt like I was looking at a proposal for a made-for-TV movie. And maybe this will be a made-for-TV movie. But I think it's awfully sad.

What this hearing is really about is sorting through a dark chapter of corporate governance so that shareholders and the employees themselves can look and see is this the kind of corporate practice that we believe in in this country.

Understanding what happened here hasn't been easy. As you said, Mr. Chairman, our staffs have reviewed thousands of documents and interviewed many witnesses in a short period of time.

But we've been able to formulate some key questions: Why were such marginal methods used in this investigation? Who approved them? And who knew about them and when?

Have these tactics been used before, and if so, where? And will they ever be used again at Hewlett-Packard? I think I know the answer to that already.

What assurances can they company give that protections are in place so they will not be used? And for those that did approve them, what was the justification and did they believe that that approval showed good judgment?

And, finally, where were the legal and ethical guardians of H.P.'s corporate interest when all of this was happening? And whose job was it to steer this ship clear of the icebergs?

DEGETTE: For example, was it not a red flag when discussions were occurring about using fraud and deception to obtain third-party phone records from journalists?

Was it not a red flag when discussions were broached about even the possibility of placing janitors or fake employees in news organizations like the Wall Street Journal or CNET to engage in spying?

Was it not a red flag when covert photographers were photographing board members or tracking their wives to bingo parlors or reporters to their children's schools?

I'm very concerned, Mr. Chairman, about the judgment that went into these decisions. And I'm concerned about more: whether this is just an accepted practice throughout corporate America.

Finally, I'm just as concerned about other people who may have known about these things and didn't say no.

I don't understand how the entire board of director, all of them potential targets of this spy ring, the CEO or the general counsel, saw or knew so little when so much was going on.

Finally, Mr. Chairman, and I will finish, we passed a bill on pretexting in this committee last spring. We passed this bill on a unanimous bipartisan basis and sent it to the floor. It was scheduled for a vote on May 2nd of this year where it apparently fell into a black hole.

I think that these practices, which we now all agree -- the pretexting practices, which were illegal, need to be stopped and Congress needs to send a clear message. That message is we need to pass our pretexting legislation.

Thank you very much, Mr. Chairman.

WHITFIELD: Thank you, Ms. DeGette.

The chair recognizes Mr. Walden for his opening statement.

WALDEN: Thank you very much, Mr. Chairman. I appreciate the work that you have put into this and that our committee staff has put into this as well.

This is a most troubling day, as you can tell, for all of us in this room. Certainly for Hewlett-Packard, in terms of what went on and what we now know and what we may learn today; it is troubling for, I think, all of us as Americans to know that this practice goes on all across this country.

WALDEN: And if this practice were so simply described as legal, then I ask you why are so many witnesses today either going to take the Fifth Amendment or have quit their jobs?

Clearly when the spotlight of public scrutiny is put to bear on this practice, it is obvious that nobody believes this is right. And I think that's the fundamental question here.

For those who said conveniently, "Well, we're told it's legal, so it must be OK," where was somebody to say, "This just isn't right"? Somewhere, some adult should have stepped forward and said, "Stop this. This isn't right."

Planting spies in newsrooms. I have a journalism degree. I can't imagine in a newsroom having spies planted there to find out who might be leaking.

Setting up e-mail spyware. Tracking down who calls who from their private cell phone or their home phone.

This is not about law. This is about ethics and I think morality. And I just find it horribly offensive and outrageous conduct. I really do.

I spent five years on a community bank board, five years on a hospital board. I've been a small business owner for 20 years. I understand the importance of keeping proprietary information proprietary. But to go to this level to try and find out who might be leaking something, there's no excuse for it. There just isn't.

I agree with my colleagues on this committee. We have a fine piece of legislation that will draw a very bright line about what's legal or not.

You know, Congress passed a law that said you can't find out what videos we rent. We need to pass a law -- for anybody who questions this practice -- that it's clear that it is illegal to go find out who I call, when I call them and divulge that information.

And, of course, pretexting goes much beyond just phone records, as we have unfortunately learned in this committee. So we need to pass that legislation into law, and we need to do it soon.

I also want to know, are these practices used on other boards in America? And some of our witnesses today probably serve on multiple boards. I want to know are these practices of pretexting thought to be OK to go after competitors to find out what they may know or who they're talking to?

And I'm not alleging that H.P. engages in that. But clearly this is a practice that, frankly, six months ago I didn't even know existed.

WALDEN: I never heard of the word "pretexting." And I doubt that I'm alone in that.

Because, see, the synonym of pretexting is lying. Because that's what it's about: I'm going to lie to somebody to get the personal and private information on somebody else so that I can use it to my advantage.

And I just think that's unacceptable. It's outrageous. And people better come clean about how they've done it and how they're never going to do it again and then what we need to do to make sure that the law's crystal clear.

Mr. Chairman, I appreciate the work you've put into this and I look forward to hearing from those witnesses who will be actually willing to testify today. Thank you.

WHITFIELD: Thank you, Mr. Walden.

At this time the chair recognizes the ranking minority member of the full committee, Mr. Dingell of Michigan.

DINGELL: Mr. Chairman, thank you. And thank you for holding this hearing.

This morning we have a fine case study in deceit, dishonesty, improper behavior, probably criminal misbehavior. And we have a fine display of arrogance, cover-up and probably gross stupidity.

We have before us today witnesses from Hewlett-Packard, a respected American company, to discuss a plumbers operation that would make Richard Nixon blush were he alive.

And calling the folks who did or allowed or participated in this Keystone Kops is an insult of the grossest sort to the original Keystone Kops.

Hewlett-Packard, as I mentioned, is a well-respected company in the halls of Congress, around the world; appears before us to answer for using lies and deception to obtain telephone records and other sensitive personnel information in order to uncover the source of leaks to the press.

And I have to ask our witnesses, what were you thinking? Where was the management while this investigation was running amuck?

DINGELL: Why weren't you paying attention at the briefings? And why didn't you read the reports that raised red flags? Where was the board of directors?

I understand board leaks could undermine a company's planning and curtail frankness of board discussions. But the cure here appears to have been far worse than the disease and it now poses a severely greater threat to Hewlett-Packard.

Where was the board leadership and responsibility?

One interesting thing is, where were the lawyers? There were red flags waving all over the place raising questions about the illegality of pretexting but none of the lawyers stepped up to their responsibilities.

This morning we're probably going to have a very interesting exercise in which witnesses appearing at that crowded witness table amongst the lawyers will be taking the Fifth Amendment. One must ask have we here a law which is so obscure, curious (ph) or non-existent that lawyers couldn't tell what was the law, or that they participated actively, or that they were part of the exercise about which we are now having proper complaints.

Now, I note that the Congress has not stepped up either. What happened to this committee's legislation, H.R. 4943, the Prevention of Fraudulent Access to Phone Records Act: came out of this committee with a heavy vote, bipartisan participation under the effective leadership of our chairman and the senior members on both sides of the aisle and, indeed, all of the members.

That bill would permit the FCC to seek civil penalties against pretexters and to provide expanded protections to customers' call records.

The bill came out, as observed by Ms. DeGette, on May 2, 2006. And it was scheduled for consideration on the floor of the House of Representatives.

In some curious fashion, it disappeared. It was pulled from the suspension calendar where it would have passed comfortably under expedited process, but without explanation of any sort. It's not been heard of or heard from since.

Why did this happen? Who did it? And why?

Also, no one in the administration is stepping up either. I submitted questions for the record in this subcommittee's June 21 hearing, asking comments from the executive branch homeland security and law enforcement agencies on how the bill could be changed to address any concerns that they might have from a national security standpoint.

I have been informed that the response is being held up, I assume diligently, by the Office of Management and Budget, which appears to be another black hole.

DINGELL: I commend the chairman of the subcommittee for holding two days of hearings on this matter. It is most important.

But hearings are going to be a poor substitute if the committee's bill remains in legislative limbo.

I suggest that we all should get behind the bill again and see to it that it's enacted in law so that perhaps we won't have so many distinguished Americans coming before this committee in the most profound embarrassment to take the Fifth or to explain in some curious, red-faced way why they, or the entity of which they are a part, was engaged in such shameful and shameless behavior.

Thank you, Mr. Chairman.

WHITFIELD: Thank you, Mr. Dingell.

At this time, I recognize Ms. Blackburn of Tennessee for her opening statement.

BLACKBURN: Thank you, Mr. Chairman. I do want to thank you for holding the hearing today.

The Energy and Commerce Committee has focused on the pretexting issue this year, as you have heard my colleagues mention in their statement. And it appears we were correct to recognize that this subject was a problem.

Today's inquiry I believe will reaffirm our previous work, which showed a need for legal clarity regarding pretexting. And we thank our witnesses for coming before us today.

We are not here to serve as judge and jury of H.P. and their actions. Their shareholders, the stakeholders and the legal system have that responsibility.

Our job today is to focus our attention on the action and the practice of pretexting.

Currently, the law regarding pretexting is ambiguous. As Mr. Dingell just said, this case does illustrate how some have taken advantage of that ambiguity.

Ethical behavior is not always something that we can regulate. We certainly cannot mandate it. But we certainly can punish actions that are both unethical and a violation of other's rights.

Our committee is correct to be concerned with corporate governance and the American corporate culture. The trust and integrity of the American people toward the American corporate culture under our free enterprise system depend on ethical behavior and an element of trust.

It is with deep regret that we see that there is a violation of that trust.

I think we ought to be clarifying the concept of pretexting. The terms sounds innocuous, but the reality is that it's theft, and the act of pretexting is purposeful.

It's an action meant to deceive, defraud and obtain information one is not entitled to have. It's a more modern problem, but one this committee has recognized and is working to address.

In January, my colleague, Representative Inslee and I introduced the Consumer Telephone Records Protection Act of '06. The bill dispenses with the ambiguity in laws governing the action, prohibiting individuals or entities from fraudulently obtaining another person's telephone records under false pretext, soliciting someone to obtain phone records under false pretext, selling phone records or fraudulently obtaining under false pretext. Violations would be criminal offenses, punishable by up to five years in prison and $250,000 in fines for individuals and $5,000 in fines for companies, which is a Class D felony. These penalties are doubled for an aggravated offense.

We've passed a similar bill with civil penalties. These bills would clearly have penalized those who engage in this sort of behavior we'll hear testimony about this morning.

BLACKBURN: We've already received information that numerous companies are profiting by using suspect and irresponsible methods to gain access to consumers' telecommunications records.

When a Fortune 15 company contracts with one of these companies, yes, it gets our attention, and rightfully so.

We want to know who in the company or in the private investigation firms came up with the proposal to pretext, who created and ran the Jacob project, which used suspect methods to gain information from media sources.

We hope companies aren't using these methods to engage in corporate espionage to gain a competitive advantage over other companies or over innovators or other creators. But we do want to know how pervasive is this practice in America's corporate boardrooms. Are there other companies that are using pretexting for other reasons?

I look forward to the testimony today. I hope we learn that H.P. is no longer using the services of the companies to monitor their board members or the employees, or, just as concerning, using these tactics to monitor or spy on other companies.

Thank you, Mr. Chairman. I yield back.

WHITFIELD: Ms. Schakowsky of Illinois is recognized for her opening statement.

SCHAKOWSKY: Thank you, Mr. Chairman and Ranking Member, for holding today's hearing on Hewlett-Packard's pretexting scandal.

I'm glad that we have the opportunity to further examine what is undoubtedly the most notorious case of pretexting for personal phone records to date.

In July of 2005, I circulated a letter to my congressional colleagues, drawing attention to the burgeoning practice of pretexting of phone records. I urged them to join me as co-sponsors of the SAFE CALL Act, which is a somewhat tortured acronym for Stop Attempted Fraud Against Everyone's Cell and Landlines Act, a bill that would expressly prohibit pretexting for phone records.

I'm proud that my bill was used as the basis for Title I of H.R. 4943, the Prevention of Fraudulent Access to Phone Records Act, which passed our committee unanimously.

We drafted the bipartisan H.R. 4943 because questions were raised about whether pretexting for phone records was legal, not to mention the safety and privacy concerns that it raises.

The FTC had successfully brought pretexting cases under a Section 5 authority which prohibits unfair or deceptive acts and practices. You would have thought that that would have set the stage for understanding that this is not a legal act.

A number of states, including my home state of Illinois, under our attorney general, Lisa Madigan, used their general consumer protection and consumer fraud statutes to file suits against the practice.

SCHAKOWSKY: And now, along with 11 other states, Illinois has passed the laws.

But obviously, there are still those who missed the point and choose to dabble in what they claim is a gray area of the law. We need to pass H.R. 4943, and maybe instead of naming post offices for the rest of most of today, we could do it before we recess.

Hewlett-Packard is a perfect example. When Kevin Hunsaker, H.P. senior counsel and director of ethics, asked whether pretexting for board members and reporters' phone records was, quote, "aboveboard," unquote, Tony Gentilucci, H.P.'s investigations manager, replied, quote, "I think it is on the edge, but aboveboard," unquote.

Hunsaker, instead of demanding an explanation or ringing the alarm bells, responded, quote, "I shouldn't have asked," unquote.

Additionally, H.P.'s September filing with the SEC revealed that the board was advised by its outside general counsel, Larry Sonsini, that pretexting for phone records was, quote, "not generally unlawful," unquote.

The filing went on to say, "But such counsel could not confirm that the techniques employed by the outside consulting firm and the party retained by that firm complied in all respects with the applicable law," unquote.

Hewlett-Packard's action in hedging about pretexting's legality demonstrates just how pressing it is to pass our bill to put an end to all questions.

As I said, Congress and at least 12 states that have passed anti- pretexting laws agree that pretexting is unacceptable and that the ends -- in H.P.'s case, it was squelching board leaks -- do not justify the means.

What makes the H.P. story more disheartening is that H.P. was believed to be a corporation that set business standards that others should follow.

In January 2005 H.P. was named the most trusted company in America for privacy. In July 2006, the Commerce, Trade and Consumer Protection Subcommittee, of which I am the ranking member, invited H.P. to testify about what it does to raise the bar on consumer privacy protections.

Little did we know that when we were trying to learn about its best practices, H.P. had just been engaging in the worst practices out there.

SCHAKOWSKY: If corporations that are supposed to be so reputable are employing such legally and ethically questionable behavior -- I would argue actually that the case is settled -- we have to ask what other corporations are doing.

So I very much look forward to hearing from today's witnesses. I wish all of those that were called today would fully testify. And I truly hope that we can get to the bottom of this scandal.

Thank you.

WHITFIELD: The chair recognizes Mr. Barton of Texas, who's chairman of the full Energy and Commerce Committee.

BARTON: Thank you, Chairman Whitfield, thank you, Ranking Member Stupak, for continuing this investigation.

We're convened here to examine the facts of the Hewlett-Packard pretexting scandal.

Pretexting is the use of deception to discover who you have been on the phone with and maybe even where you were. In plain language, it's pretending to be somebody you're not to get something you probably shouldn't have to use in a way that's probably wrong.

We've been investigating it because most Americans believe that their phone records are theirs; that their private property should only be accessed with their permission.

Pretexting first came to this subcommittee's attention when it was reported that the Chicago Police Department, of all people, had warned undercover police officers that suspicious drug dealers could expose them just by poking through their phone records.

Months of investigation and hearings produced plenty of troubling facts and even some news.

Now, today, with this hearing, it's global news, as you can see, with all the cameras and reporters that are in the room, because nobody would have guessed that such a great company as Hewlett- Packard, one of the first high-tech companies in the United States, would employ the methods of pretexting that are sometimes used to chase after cheating spouses in order to stalk its own board members and, believe it or not, even tail journalists.

But against what standard should Hewlett-Packard's conduct be measured?

BARTON: And I guess the best place would be a quote from an e- mail written by Hewlett-Packard's security employee on August the 23rd of this year. The subject line of that e-mail reads: "Standards of business conduct." And the author writes, and I quote: "This investigation will be a defining case which will test the company's claim of having uncompromising integrity," end quote.

I should say so.

This hearing is going to examine a year-long course of questionable conduct led by Hewlett-Packard's chairman of the board and reviewed by Hewlett-Packard's general counsel who, I'm told, resigned this morning or has announced that she's going to resign.

That conduct included, among other things, obtaining personal phone records through pretext, physical surveillance, monitoring of employees' instant messaging over the Internet, planting spyware or attempting to plant spyware on the journalist's computer, and even planning to put spies in news rooms.

I think it will be some time before the American corporate icon of Hewlett-Packard can reclaim its mantle, self-imposed, of -- again, I quote -- "uncompromising integrity," end quote.

The public, Hewlett-Packard's shareholders and this committee are all very concerned that such a great company has strayed off course.

I have to say that, as alarming as these details have been disclosed, I wonder if Hewlett-Packard would have and could have done more to right the ship.

The company seems paralyzed.

On September the 6th of this year, H.P. publicly disclosed to the Securities and Exchange Commission that the company had obtained personal phone records procured through pretext as part of an effort to find an individual who was leaking confidential business information.

Records provided to this committee show that phone records were being pulled by H.P.'s internal investigation team for more than a year, with the approval and knowledge of both then-Chairman Dunn and General Counsel Baskins.

It's my understanding that the day-to-day operations were controlled by the company's lead ethics attorney, Kevin Hunsaker, so that the investigation could be protected by the attorney-client privilege.

Mr. Hunsaker would frequently report to Ms. Dunn, to Ms. Baskins, about the developments and the next steps in the investigation. Yet not until last Friday, September the 22nd, did H.P. force Patricia Dunn's resignation.

I also have to say that I'm troubled to find out that the board's outside counsel, Larry Sonsini, learned last April that the investigation included information from fraudulently obtained phone records.

Why didn't he immediately recommend putting the brakes on the investigation?

BARTON: Did he ask any questions about the investigative methods employed by Ms. Dunn, Ms. Baskins or Mr. Hunsaker?

On June 28th of this year, instigated by concerns of former board member Tom Perkins, Mr. Sonsini reported to Mr. Perkins that pretexting for phone records was, I quote, "a common investigatory method," end quote, and that the, quote, "process was well done and within legal limits," quote.

I hope that Mr. Sonsini will explain to us exactly what due diligence he undertook before providing his assessment of the legality of pretexting for phone records.

And, again, pretexting is pretending to be somebody you're not to get something you probably shouldn't have to use in a way that's probably wrong.

By coincidence, just a week before Mr. Sonsini's e-mail, the Federal Bureau of Investigation testified before this same subcommittee about is position on the legality of procuring records through pretexting.

The FBI testified that there are compelling reasons to believe such operations violate federal law, including the Wire Act. In fact, over the next few days of hearings, we actually expect several individuals -- and several is actually; I should say numerous individuals -- to invoke their Fifth Amendment right against self- incrimination, which they are obviously entitled to do, and to decline to answer our questions about their involvement with pretexting for phone records.

It's funny to me that if you have to invoke your Fifth Amendment right, you're doing something that's legal. I'm still waiting for someone to describe a legitimate way, short of a subpoena issued by a judge or Congress, to obtain another person's phone records without their permission.

I would like to close on this note: Whether such activities are already illegal or not, this committee has done its part to pass a bill that makes it abundantly clear where the federal government stands regarding pretexting for personal records.

On March the 8th, the Prevention of Fraudulent Access to Phone Records Act, H.R. 4943 was unanimously -- unanimously -- reported out of this committee.

BARTON: H.R. 4943 would make it illegal to obtain cell phone records fraudulently, as well as to solicit or sell such records.

I'm, of course, disappointed by the delays that this bill has experienced since it left our committee. It's not yet come to the floor for a vote.

But I have asked, as late as early this week, that it be put on the floor as soon as possible. And I'm going to continue to request that the House of Representatives vote on this bill on the floor before the Congress adjourns this year.

We must make pretexting clearly illegal. There is no room in our society for pretexters getting your phone records. If it can happen to a member of the board of directors of a Fortune 500 company like Hewlett-Packard, it can happen to any of us.

With that, Mr. Chairman, I yield back.

WHITFIELD: Gentlelady from Wisconsin, Ms. Baldwin, is recognized, five minutes.

BALDWIN: Thank you, Mr. Chairman.

Unfortunately, it has taken this Hewlett-Packard boardroom spying scandal to make pretexting a household word.

Pretexting is simply a fancy term for lying and deceiving. Regrettably, this type of privacy invasion will now be associated with the H.P. way, a once proud reputation of the highest integrity and ethical standards, now tainted.

The committee's investigation, so far, has turned up a textbook case of exactly how not to operate as a corporate board. Bickering and division between H.P.'s board members created an atmosphere of antagonism and mistrust.

Investigation into the source of boardroom leaks concerning what appears to be rather benign -- albeit confidential -- company information, were authorized against at least seven board members, nine journalists and two H.P. employees, as well as some of their relatives.

Unsavory techniques -- including pretexting phone records, trafficking of Social Security numbers, a sting operation through a fictitious person, tracer spyware, physical surveillance, the planting of undercover operatives, even the search of individuals' trash at home -- may have been employed during this investigation.

Despite the involvement of teams of lawyers specializing in corporate ethics, events of the investigation, code named Kona I and Kona II, unfolded like the plot of a third-rate detective novel.

The laundry list of inappropriate investigative conduct, lax oversight and poor legal advice will be further explored and revealed today.

But even when the dust settles, when we get to the bottom of who knows what, when, an impression of corporate America turned rogue spying operation, will persist in the minds of the public.

It is one of the highly unfortunate consequences of H.P.'s conduct. People will wonder how many companies hire third-party investigators to spy on their own employees, board members or outside contacts.

They will wonder how their own phone records could be obtained by their employers under false pretenses, or how their Social Security numbers could be unscrupulously shared with strangers, and how their e-mails could be embedded with spyware, secretly mining personal information.

H.P., known for durable, high-tech products, has now given us another lasting artifact: The perception of corporate America as our next Big Brother.

Still, one silver lining of this scandal is that the public is now much more aware of the concept of pretexting. I believe pretexting in the wireless industry is only the tip of the iceberg.

Therefore, a comprehensive legislative approach is necessary to cover all sectors where pretexting is a possible method to breach personal data security.

Our committee has worked diligently and in a bipartisan manner to pass legislation that would outlaw the specific tactics involved in the H.P. scandal.

BALDWIN: And I would further urge criminalization of pretexting to encompass the full spectrum of telecommunications and communications services, including records obtainable from calling cards, Internet Web sites, and Internet telephony.

The protection of consumers' fundamental rights to privacy simply cannot rely on patchwork policymaking.

Now, make no mistake, I believe that existing law covering unfair and deceptive business practices already prohibit pretexting, but if corporate America desires further guidance on whether highly unethical behaviors are indeed legal or illegal, as demanded by some of the witnesses testifying before us today, our committee should provide assistance by enacting clear and overarching bright line rules to outlaw such behavior once and for all.

When Dr. George Keyworth, one of the subjects of the leak investigation, was confronted with the results of the probe during a board meeting, he reportedly exclaimed, and I quote, "I would have told you all about this. Why didn't you just ask?"

It seems that H.P. could have easily avoided this whole mess by applying the most basic principles of transparency and common sense.

For working Americans in 2001, the scandal surrounding Enron challenged their trust in the markets. Today, the H.P. scandal is shattering their expectations of telecommunications privacy.

H.P. has led the nation on an expedition into corporate intrigue. As they were trying to contain the damage, the public deserves to know what steps will be taken not only to restore confidence in this company, but also to shore up the boundaries of privacy breached by the scandal.

Thank you, Mr. Chairman.

WHITFIELD: Thank you.

The chair recognizes the gentleman from Texas, Dr. Burgess.

BURGESS: Thank you, Mr. Chairman. And thank you for continuing your leadership in investigating this important issue.

Today's hearing is, unfortunately, additional evidence of the deceptive practice of pretexting. I'm confident that our committee will continue to work diligently to protect the American public and their private records.

The war on privacy is fully engaged, and we need to provide consumers with additional protections.

Pretexting is, Chairman Barton told us, the impersonation and deception of others to gain access to others' personal information, probably crossing some legal line.

But we all learn from an early age that lying is wrong. And I don't understand how an intelligent board from a venerable old company in this country could not know that these deceptive actions were wrong. Even if you somehow believed what you were doing wasn't completely illegal, the questions you asked shows that reasonable minds would still view these actions as completely out of bounds.

Others on this panel have already asked: What in the world were you thinking? The past two years your company even won awards from TRUSTe as the most trusted company for privacy award. And you're supposed to be celebrating your respect for people's privacy and encourage a safer digital marketplace.

Your business model depends upon the public's trust in a digital marketplace.

While Hewlett-Packard's headlines have brought the issue of pretexting into the public eye, this committee has been working on the matter for much of this year.

In fact, this past spring the Energy and Commerce full committee marked up comprehensive legislation -- you've heard others reference it, H.R. 4943 -- that will make pretexting for telephone records illegal and will strengthen security measures taken by telecommunications carriers to protect such records.

BURGESS: Perhaps the silver lining to this cloud is that the questionable actions will be a call to action to get this important legislation passed.

You've heard plenty of questions from, in fact, both sides of the dais.

You know, a lot of people in this country, myself included, worry about outsourcing, worry about sending American jobs and manufacturing overseas.

But at the same time, these types of actions -- and you've heard people reference it this morning: We may be forced to add additional regulatory layers trying to legislate that corporate boards simply behave responsibly; a Sarbanes-Oxley for ethics, if you will. I shudder to think what that will look like.

But it begs the question: How widespread is this practice? How entrenched is this practice in corporate board rooms in this country?

And you've got to worry about the collateral damage. You've got 140,000 employees worldwide, 57,000 in this country, almost 10,000 in my home state of Texas, 200 in my home district in North Texas. What about the responsibility to those employees? What about the responsibility to the shareholders; not just direct shareholders, but all those people who hold mutual funds, 401(k)s, exchange-traded funds, THRIFT savings plan programs? Hewlett-Packard is a big player in all of those.

And then finally, and you've heard it referenced already, the violation of the public trust.

Again, the war on privacy is fully engaged from several sectors in our society. And, Mr. Chairman, I hope that we can encourage others in the Congress to get our bill to the House floor and give consumers at least one more tool to fight back.

And I yield back the balance of my time.

WHITFIELD: The reason we're hesitating here for a moment: We have some members here today who are not members of the subcommittee, and they are members of the full committee. And we're going to ask unanimous consent for them to be able to make a brief statement. But we want to get through the subcommittee first.

And the chair recognizes Mr. Stearns of Florida.

STEARNS: Thank you, Mr. Chairman.

And, of course, we all appreciate this hearing.

We're holding the hearing, obviously, to investigate the disclosure that investigators hired by Chairwoman Patricia Dunn used pretexting to obtain the phone records of directors and journalists during an investigation into company media leaks.

Having been through the Enron oversight hearing, Mr. Chairman, there's some similarities here. But this is unique, I thought. Truth is stranger than fiction in this case.

The evidence we've seen shows that this investigation is part "Keystone Kops," it's part "Mission: Impossible," and perhaps part of "All The President's Men" all tied together.

I think, Mr. Chairman, if we ask Ms. Dunn if she thought she was guilty, she'd probably say, "I was not."

STEARNS: She would make the case that she just went to the lawyers and the lawyers told her what she's doing is acceptable; it is legal and that she continue to do that. So she hired the investigators and they went ahead and used pretexting.

But I would remind her and others that I remember when Ken Lay was here, and Jeff Skilling, of course, testified he used the cloak of cover, Vinson & Elkins. And they all, during the Enron hearing, used the same kind of argument, that, "We have a cloak of cover because we talked to legal people."

Now, when you look at the California penal code, which is 538.5, it says specifically, "prohibits fraudulently obtaining information from a public utility. This statute makes it unlawful for any person to transmit or cause to be transmitted by means of wire, radio or television communication any words, sounds, writing, signs, signals or pictures for the purpose of furthering or executing a scheme or artifice to obtain from a public utility confidential, privileged or proprietary information, customer records, billing records, customer credit data or accounting data, by means of false or fraudulent pretenses."

So I think the law is that you can't use fraudulent means.

Obviously, you know, if you went ahead and did pretexting on Mr. Michael Dell of Dell Computers and you got his last 500 calls, you would say that you had the legal right to do that, Ms. Dunn? I don't think you would. And I don't think Michael Dell would appreciate that.

So in many ways, I don't think you can hide behind the cloak of cover of your legal team. And you must take personal responsibility.

But the impetus for this hearing perhaps has much larger impact here in this country. I believe pretexting should be illegal in any context, financial or otherwise.

The action by the Hewlett-Packard officials were unconscionable. But make no mistake: The recent events surrounding it are just symptoms of, I say, a much bigger problem.

You know, obviously, the question would become, what did she know and when did she know it? But another question is, for Michael (sic) Hurd, can he say he knew nothing about this?

He was advised, I think, by e-mail. Could he also say, "Gee whiz, I'm just out of the picture here?"

He's the chief executive officer and, now, chairman. And certainly, when Ms. Dunn notified him, either by e-mail or by voice or whatever, he did nothing. He just sat there and said, "Go ahead."

STEARNS: Because he could have said to her, "What are you going to do? Who are the investigators? And are they going to do something that's fraudulent here?"

So I think he has a certain amount of responsibility and culpability here and shares it with Patricia Dunn.

The growing market for personal information is enormous. And many of us have seen this. And that's why we need to pass legislation to stop this.

I chair a subcommittee called Commerce, Trade and Consumer Protection. We've amassed extensive records on these issues. I've introduced H.R. 4127, the Data Accountability and Trust Act, which is designed to improve data security and attack the scourge of privacy- infringing practices like pretexting that continues to be exploited on the Internet.

The DATA Act will go a long ways to protecting the privacy of all Americans, and I urge its passage.

Our committee has also been involved with other hearings dealing with privacy. So in a larger sense, Mr. Chairman, we in Congress have to step up to the plate, pass not only the DATA Act, which came out of my subcommittee and passed the full committee by unanimous vote, almost, but we also must go to the heart of this unprecedented assault on personal data and more specifically on our private lives.

And thank you, Mr. Chairman.

WHITFIELD: The chair recognizes the gentleman from Washington, Mr. Inslee, for his opening statement.

INSLEE: Mr. Chair, we're all disturbed in our each unique way. I learned about this last Christmas when I was surfing the Web, reading some bloggers, about people that would sell your personal cell phone records on the Web for $100. And I started looking into it, and I was astounded that this was going on.

And at the time, I had the sense that what was going on is there was this sort of underworld of these scoundrels and sleazes that are operating in the dark recesses of American society who are using pretexting to sell your phone records on the Internet.

And the thought that a major league, respected company like H.P. would be involved in that just never, never crossed my mind. And that's what's so disturbing to me.

We immediately in January of this year, Marsha Blackburn and myself, introduced a bill to make this -- to close any possible ambiguity about this, to make sure they were criminal violations.

And now this committee has in fact passed a bill that will give the federal regulators -- the FTC and the FCC -- the tools they need to make sure that nobody does this, whether it's an H.P. or one of these low-life scoundrels.

INSLEE: But I have to say there's another sort of -- if not a scandal; at least, great disappointment here.

We now have known about this since last Christmas, and Americans today, at this late date, do not have protections against pretexting. Neither has the loophole or any ambiguity been closed, nor has the bill that this committee passed on a bipartisan basis passed, to give regulators the tools in the toolbox to put a hammer to it and stop it.

I want to commend our Chair Barton for his work on this and some of the Republican colleagues. But I have to tell you, it isn't just a leadership failure at H.P. There's been a leadership failure in the GOP in getting this job done. And I'd like to know who in the GOP leadership has their foot on this bill that's put it on ice.

We passed it, it was scheduled to be on the floor in May. Under Chairman Barton's leadership, we passed it in this committee in March and nothing happened.

That's a story here, too, that I'd like to get to the bottom of.

And while we are rightfully dumping every outrage we can on H.P. leadership, H.P. leadership may look back up here to GOP leadership and say: How come you're not moving this bill?

I've talked to the Intelligence Committee to see if they've got some hold on it. No problems there. But who's the little secret force here that's got control of this Congress that's stopping us from passing a bill to stop pretexting? I'd like to know who that is and I'd like an answer from GOP leadership why they're not moving this bill.

I also hope today that we learn some more about how deep this is. I join my colleagues in wanting to know whether or not H.P., if they did this to their own, what are they doing to their business competitors?

INSLEE: I'd like to know if this is a deeper situation that's going on. Because this is clearly not the act of just one rogue employee. It does appear to be a widespread, concerted effort, on multiple fronts, to violate people's personal privacy.

And we'd like to know where it is so that we can get the job done.

I'll tell you one thing I hope comes out of this hearing: I hope the message is delivered to the leadership of the House of Representatives to pass this bill in the next 24 hours. We could have this on the suspension calendar tomorrow night so we can pass this bill, not have to wait till some lame duck session.

And I hope that that's one thing that comes out of this committee hearing.

Thank you.

WHITFIELD: The chair recognizes the gentleman from New Hampshire for his opening statement, Mr. Bass.

BASS: Thank you, Mr. Chairman. And I appreciate your holding this hearing.

A couple of observations. First of all, I think we agree on both sides of the aisle here that H.R. 4943 should be brought to the floor of the House and passed.

I hope that what we gather from the information that we receive in this hearing is not so much who did what, when, where, how and who, but rather whether agreeing that the events that unfolded at Hewlett- Packard were not good, not right, probably not lawful; but how we can apply this issue to the legislative measure before us today, and whether or not the witnesses that are testifying today feel that the bill that we wish to have voted upon on the floor of the House is adequate to address the problem and prevent future occurrences like this from happening, or whether or not we need to address the issue in a broader fashion.

I think this is a helpful hearing, the subject at hand. And I look forward to hearing the testimony of the witnesses.

Thank you. Yield back.

WHITFIELD: I believe all members of the subcommittee, now, have given their opening statements. And last night we were approached by two members of the full committee who wanted to make an opening statement.

So I'm going to ask unanimous consent that those two, Ms. Eshoo, who represents Palo Alto, be recognized for three minutes for her opening statement, unless there's objection.

And Mr. Otter, do you want to make an opening statement as well? OK. So Mr. Otter, Ms. Eshoo and Mr. Markey for three minutes.

And without objection, I'll recognize Ms. Eshoo for her opening statement.

ESHOO: Thank you, Mr. Chairman, for allowing me to be a guest of the subcommittee this morning; a member of the full Energy and Commerce Committee.

This is, obviously, for the people of my congressional district -- thousands of H.P. employees -- a sad day for us.

H.P. is headquartered, as you all know, in Palo Alto. The meaning of the words "palo alto" is "tall tree." And that is what H.P. has been from its earliest days to this new part of a new century. It's headquartered in Palo Alto. It employs thousands of my constituents -- decent people who have helped to lift up this company that has made enormous economic contributions to the American economy.

H.P. is really the seminal company in Silicon Valley.

ESHOO: It's the progenitor of so much that has followed.

The two gentlemen that founded the company, Bill Hewlett and David Packard, changed our region. Silicon Valley and those that come from the area or are privileged to live there know that we would not be what we are were it not for the billions of dollars that they have placed in trust funds that have improved health care, from the Lucile Packard Children's Hospital to countless, countless efforts that have made our region really the envy of so many places in the United States and the world.

So we're here in a troubled day and troubling, deeply troubling things that have taken place.

There is an irony, in my view, about all of this surveillance. And I'm not here to defend anything that isn't defensible. But the irony today is -- I think it's an irony -- that on the floor of the House we are going to be considering the administration's surveillance bill, where FISA has essentially been -- is being overthrown, removed, and a whole new set of issues. And the American people: Get set for surveillance.

I would like to point out something that I think the Congress, in addition to passing this bill, is going to have to address, and that is where does a publicly held company go when they have a member of their board of directors that doesn't stop talking and damages -- and walks away from not only the credibility of the company but also the fiduciary responsibility. I think it's something that needs to be addressed...

WHITFIELD: The lady's time...

ESHOO: ... and I want to ask some questions about it.

WHITFIELD: ... has expired.

ESHOO: Welcome everyone here. And thank you, Mr. Chairman, for allowing me to be a guest of the subcommittee.

WHITFIELD: The gentleman from Idaho is recognized for three minutes.

OTTER: Thank you very much, Mr. Chairman. And I appreciate very much the unanimous consent waiver that you have given us non-members of this subcommittee.

But I'm here more today, I suspect, out of curiosity than the seeking, actual seeking of information. And my curiosity runs in a couple of veins -- as I think was just mentioned by the lady of California -- whether or not we can really establish in this Congress and this government the moral high ground in order to sit in judgment, write rules and regulations about activities in the private sector that we don't enjoy the same control over in the public sector.

And so whether it's -- and I fully understand the gravity and the difference in the situations. However, the process is not different. People have an expectation of privacy. They should enjoy their privacy. Yet, we find out a very strong and urgent message coming from our own Justice Department about how perhaps that privacy is not so dear as when the security of our government is being threatened.

So I'm looking forward with some curiosity as to how we're going to maintain, in light of some of the activities of the National Security Agency and other agencies of our government that have been questioned in the recent past, and how easily we're going to sit on the bench in judgment of another who is simply trying to protect the security.

OTTER: And bear in mind, Mr. Chairman, I'm not condoning any of this activity. I condemn it just as bad in the private sector as I do in the government.

So my curiosity is going to keep me in this seat for as long as I can stay here with you, Mr. Chairman. And I thank you very much for the time.

WHITFIELD: Thank you, Mr. Otter.

The gentleman from Massachusetts, Mr. Markey, is recognized for three minutes.

MARKEY: Thank you, Mr. Chairman.

The upshot of H.P.'s snooping and spying program is the compromise of personal privacy for two H.P. employees, nine reporters, seven members of the H.P. board and various family members of the same.

It involved illegal pretexting of phone numbers, Social Security numbers, sifting through garbage and electronic enticements to at least one reporter to download malicious software willingly.

What has happened to our corporate culture?

You used to ask a company chieftain, who does your P.R.? Who does your advertising?

Now, do we have to add the question, so, who does your spying?

That is what this whole area has opened up, all of this from a company, on its Web site, that says, "H.P. and its subsidiaries respect your privacy and are committed to protecting it."

Today the subcommittee will be exploring the responsibility of Hewlett-Packard's management for this illegal spying operation: Who authorized the spying operation; who oversaw it; what were they thinking?

I am very concerned that H.P. may be suffering from Sergeant Schultz syndrome. Some in a position of authority are now saying, I heard nothing; I saw nothing; I knew nothing.

MARKEY: That is their defense. It is not believable.

Where were the lawyers when all this was happening? H.P. has an experienced in-house legal staff as well as access to experienced outside legal counsel. Where were these legal professionals when this spying program was put into place?

Mr. Chairman, some are suggesting that there are ambiguities in existing law which made it difficult for H.P. and its attorneys to determine what the applicable law in this area really was.

This is absolutely absurd. What happened is already illegal. Section 5 of the Federal Trade Commission Act has long prohibited pretexting. In May of this year, the Federal Trade Commission brought five court complaints charging Internet information brokers with illegal trafficking in consumers' telephone numbers.

It is already illegal.

The Telecommunications Act of 1996 added a new section, 222, to the communications act. Section 222 clearly states that customers' phone records can only be disclosed to the customer or to someone else with the permission of the customer.

I know that because I was co-author of that legislation.

And the Wire Fraud Statute also prohibits that kind of a practice.

WHITFIELD: The gentleman's time has expired.

MARKEY: I thank the chairman.

Either this is the tip of the iceberg or it is the iceberg -- if it's the iceberg, then Congress must act to ensure that we never again see this as part of corporate culture.

I thank the chairman.

WHITFIELD: At this time the chair will call forward the following witnesses on the first panel. And I would ask the staff, because we have seating assignments there, and I'm not sure it's available to everyone, to make sure they're sitting in the right seats.

But the first witness is Ms. Ann Baskins, the general counsel for Hewlett-Packard; Mr. Kevin Hunsaker, ethics counsel for Hewlett- Packard; Mr. Anthony Gentilucci, manager, global investigations; Mr. Anthony (sic) DeLia, managing director for Security Outsourcing Solutions; Mr. Joe DePante, owner, Action Research Group; Ms. Cassandra Selvage, owner, Eye in the Sky Investigations; Mr. Darren Brost, subcontractor to Action Research; Ms. Valerie Preston, subcontractor to Action Research; Mr. Bryan Wagner, subcontractor to Action Research; and Mr. Charles Kelly, subcontractor to Action Research.

If you all would please come forward and have a seat at the table, we'd appreciate it.

Just the people whose name I called will sit at the table and there are legal counsel involved, we will be introducing them as we move forward.

But just the witnesses that I called will be sitting at the table.

I apologize for the lack of space.

I would say to those participants on the first panel, this is an investigative hearing, and it is the tradition of the subcommittee to always take testimony under oath.

And I would ask all of you if any of you have any difficulty, or do you object to testifying under oath this morning?

OK.

So, if you all would please stand and raise your right hand, I would like to swear you in at this time.

Do you solemnly swear that the testimony you're about to give is the truth and the whole truth and nothing but the truth?

Thank you very much.

All of you are now under oath, and under the rules of the House and the committee, each of you do have the right to be advised by legal counsel as to your constitutional rights.

And I would ask each of you do you have legal counsel here today? If you do, if you'd please raise your right hand.

OK.

Now, Ms. Baskins, would you please give us the name of your legal counsel?

BASKINS: I'm represented by Christina Argetta (ph).

WHITFIELD: Oh, turn your microphone on. I'm sorry.

BASKINS: I'm represented by Christina Argettis (ph).

WHITFIELD: Christine Argettis (ph), OK. And Mr. Hunsacker, who is your legal counsel?

HUNSAKER: Michael Panser (ph).

WHITFIELD: Michael Panser? And Mr. Delay (ph), who's your legal counsel?

DELAY (?): Don Cannon (ph).

WHITFIELD: Cannon?

Mr. DePante, who's your legal counsel?

DEPANTE: Richard Prera (ph).

WHITFIELD: OK.

And who's your legal counsel?

(UNKNOWN): Miles Uhrlich.

WHITFIELD: OK. And?

(UNKNOWN): Susie Ribera-Alla.

WHITFIELD: OK.

(UNKNOWN): Izz Van Gelder (ph).

WHITFIELD: OK. All right.

Thank you for introducing legal counsel.

Now, Ms. Preston (ph), do you have legal counsel?

PRESTON: Yes.

WHITFIELD: Mr. Kelly and Mr. Wagner?

KELLY: No, sir.

WHITFIELD: OK.

At this time, the chair would recognize Ms. Baskins for purposes of making an opening statement if she so desires.

BASKINS: I have no opening statement, Mr. Chairman.

WHITFIELD: OK.

The chair would then recognize Mr. Hunsaker for purposes of making an opening statement.

HUNSAKER: I have no opening statement, Mr. Chairman.

WHITFIELD: The chair would recognize Mr. Gentilucci for purposes of making an opening statement.

GENTILUCCI: Mr. Chairman, I have no opening statement.

WHITFIELD: OK.

The chair would recognize Mr. Delia for purpose of making an opening statement.

DELIA: Chairman, I do not have an opening statement.

WHITFIELD: OK.

The chair would recognize Mr. DePante for purposes of making an opening statement.

DEPANTE: Mr. Chairman, I do not have an opening statement.

WHITFIELD: The chair recognizes Ms. Selvage for purposes of making an opening statement.

SELVAGE: Mr. Chairman, I do not wish to make an opening statement.

WHITFIELD: The chair would recognize Mr. Brost for the purposes of making an opening statement.

BROST: Mr. Chairman, I have no opening statement.

WHITFIELD: The chair would recognize Ms. Preston for the purposes of making an opening statement.

PRESTON: Mr. Chairman, I have no opening statement.

WHITFIELD: The chair would recognize Mr. Wagner for the purposes of making an opening statement.

WAGNER: Mr. Chairman, I have no opening statement.

WHITFIELD: The chair would recognize Mr. Kelly for the purposes of making an opening statement.

KELLY: Mr. Chairman, I have no opening statement.

WHITFIELD: Well, the chair would then, since there are no opening statements, would recognize himself for 10 minutes for the purposes of questioning the witnesses.

Ms. Baskins -- does she have the exhibit book before her?

(CROSSTALK)

WHITFIELD: Would someone give Ms. Baskins our exhibit book, please?

OK, if you would just pass it down. And I would ask Ms. Baskins to turn to Exhibit 124. I think they are numbered there.

Now, it is my understanding, Ms. Baskins, from Hewlett-Packard's counsel, that these handwritten notes are yours. And the notes dated June 15, 2005, have the heading, "Project Kona."

The first notes on the page say, "Obtaining phone numbers is a time-consuming process. Call carriers Nextel, Sprint and use pretexts to extract info; i.e., I didn't make the call."

Now, this document and others show that you were aware that H.P. was engaging in pretexting. And that is obtaining personal telephone records through impersonation, fraud and deceit as a means of identifying the source of corporate leaks.

Ms. Baskins, did you honestly believe, at the time, and do you believe today that such conduct is legal, ethical and consistent with the Hewlett-Packard way?

BASKINS: Mr. Chairman, I respectfully decline to answer, based on the rights and protections guaranteed to me by the Fifth Amendment of the Constitution of the United States.

WHITFIELD: So, Ms. Baskins, you're refusing to answer all of our questions today, based on the right against self-incrimination afforded to you under the Fifth Amendment of the U.S. Constitution?

BASKINS: Yes, Mr. Chairman.

WHITFIELD: And it is your intention to assert that right for any and all questions that would be asked today?

BASKINS: Yes, Mr. Chairman.

WHITFIELD: OK. If there are no further questions from the members of the committee, then I would dismiss you at this time.

(UNKNOWN): Mr. Chairman, may I be recognized for a question?

WHITFIELD: Yes, sir.

(UNKNOWN): Ms. Baskins, is it true that you've resigned your position from Hewlett-Packard?

BASKINS: Yes, Congressman.

(UNKNOWN): Thank you.

WHITFIELD: Ms. Baskins, you're dismissed at this time, subject to the right of the subcommittee to recall you if necessary. And at this time, you're excused.

Mr. Hunsaker, if you would please turn to the exhibit in the exhibit book there, Exhibit 25?

This exhibit shows a January 30, 2006 e-mail exchange between you and Anthony Gentilucci. And in his e-mail to you, Mr. Gentilucci explains how Ron Delia procured phone records for H.P.'s investigation.

WHITFIELD: The methodology utilized is social engineering. He has investigators call operators under some rouse to obtain the call records over the phone.

Mr. Gentilucci later writes, "In essence, the operator should not give it out and that person is liable. I think it is on the edge but above board. And you're responsible, as I shouldn't have asked."

Mr. Hunsaker, if you knew that the phone records being obtained for Hewlett-Packard's investigations were being procured through the use of a rouse or deceit and that the legality and ethics of pretexting might be in doubt, why did you permit the use of this practice in the Kona II investigation?

HUNSAKER: Mr. Chairman, on the advice of my counsel, I am asserting my rights under the U.S. Constitution (inaudible) testify here today.

WHITFIELD: And so it is your intent, then, to assert that right in response to any further questions that may be asked today?

HUNSAKER: That's correct, Mr. Chairman.

WHITFIELD: If the other members of the committee do not have a question, then I would dismiss you at this time subject to the right of the subcommittee to recall you if necessary.

At this time, you're excused.

HUNSAKER: Thank you, Mr. Chairman.

WHITFIELD: Mr. Gentilucci, I would ask you, in the exhibit book, to please turn to page 39.

If y'all can pass that down to him.

You will notice that this is an e-mail date February the 7th, 2006, addressed to you from Mr. Vince Nye, who I understand worked for you at Hewlett-Packard.

In this e-mail, Mr. Nye states, "I have serious reservations about what we're doing. As I understand Ron's methodology in obtaining this phone record information, it leaves me with the opinion that it is unethical at the least and probably illegal. If it is not totally illegal, then it is leaving H.P. in a position that could damage our reputation or worse."

WHITFIELD: I'm requesting that we cease this phone number gathering method immediately and discount any of its information.

I think we need to refocus our strategy and proceed on the high ground.

Mr. Gentilucci, despite the ethical and legal concerns expressed to you by Mr. Nye, isn't it true that you continued to utilize pretexting and other suspect tactics to obtain confidential information about H.P. employees, board members and journalists?

GENTILUCCI: Mr. Chairman and other committee members, I understand the Constitution of the United States gives me the right not to be forced to be a witness against myself.

And due to other ongoing investigations, I must assert that constitutional right. And I respectfully decline to answer the committee's questions today.

WHITFIELD: So, you're asserting yourself -- Fifth Amendment protection against self-incrimination and it's your intention to assert that right to any of the questions that may be asked of you today?

GENTILUCCI: Yes, Mr. Chairman.

WHITFIELD: If there are no further questions from other members of the committee, then, I'll dismiss you.

At this time, subject to the right of the subcommittee to recall you if necessary, and at this time, you're excused.

GENTILUCCI: Thank you.

WHITFIELD: At this time, Mr. DeLia, I would ask for you to please turn to Exhibit 4. In Exhibit 4, in July of 2005, you e-mailed a report to Patricia Dunn summarizing your findings in the Kona II leak investigation.

In this report, you state that telephone subscriber and call registers are obtained verbally from the various telephone carriers and that the investigation into the review of telephone records and the backgrounds of Business Week reporters and H.P. board members is continuing.

Mr. DeLia, did you, or anyone working for you, on behalf of Security Outsourcing Solutions, engage in pretexting, mainly obtaining access to someone's personal telephone records, without their consent, through fraud, deceit or misrepresentation, as part of an investigations by the Hewlett-Packard company into leaks of corporate information during 2005 and 2006?

DELIA: Mr. Chairman, I must respectfully decline to answer your question based upon the rights afforded to me by the Fifth Amendment of the Constitution of the United States.

WHITFIELD: And is it your intention to assert your Fifth Amendment rights to any further questions to be asked of you today?

DELIA: Yes, Mr. Chairman.

WHITFIELD: If there are no further questions from other members of the committee, then, I dismiss you at this time, subject to the right of the subcommittee to recall you if necessary. At this time, you're excused.

DELIA: Thank you, Mr. Chairman.

WHITFIELD: Mr. DePante, if you would please turn to Exhibit 109 in the document book. It's the small book, not the large book. There's a small book on the table somewhere.

Exhibit 109 is a request for the private phone records of Mr. Robert Knowling, submitted to Action Research Group by Security Outsourcing Solutions on July 6th, 2005.

It appears that you procured Mr. Knowling's detailed calling records through Eye In The Sky investigations.

Mr. DePante, did you and your company, Action Research Group, obtain and sell to Mr. DeLia consumers' personal phone records that were obtained through pretexting, lies, deceit or impersonation?

DEPANTE: Mr. Chairman, on the advice of counsel, I would invoke my Fifth Amendment privilege to decline comment at this time.

WHITFIELD: And it is your intention to assert that right to any additional questions we may have for you?

DEPANTE: Yes, sir.

WHITFIELD: If there are no further questions from members of the committee, we'll dismiss you at this time subject to the right of the committee to recall you if necessary. And at this time, you're excused.

DEPANTE: Thank you, Mr. Chairman.

WHITFIELD: Ms. Selvage, if you also would look at Exhibit 109, this is a request for the private phone records of Mr. Robert Knowling, submitted to Action Research Group by Security Outsourcing Solutions on July 6th, 2005.

The second page of this exhibit is an e-mail you sent from your Eye In The Sky Yahoo e-mail account. In it, you provided Action Research with Mr. Knowling's detailed calling records, which Action Research then passed on to Mr. DeLia.

Ms. Selvage, did you and your company, Eye In The Sky investigations, obtain and sell to Mr. DePante consumers' personal phone records that you obtained through pretext, lies, deceit or impersonation?

SELVAGE: Mr. Chairman and members of the committee, I am joined here today by my attorney, Ms. Barbara Van Gelder (ph). I'm aware there are several ongoing criminal investigations relating to Hewlett- Packard and its security contractors. I'm still not aware if I'm connected to these investigations or, if so, how.

Given these circumstances and considering the fact that the Fifth Amendment protects the innocent who might be ensnared by ambiguous circumstances, as this committee's subpoena infers I may be, I accept the advice of my counsel and respectfully will decline to answer any questions posed to me today on the basis of the rights guaranteed to me by my Fifth Amendment rights.

WHITFIELD: And it's your intention to assert your Fifth Amendment right for any of the other questions we may have?

SELVAGE: Yes, sir.

WHITFIELD: If there are no further questions from committee members, then we'll dismiss you at this time, subject to the right of recall if necessary. And at this time you're excused.

SELVAGE: Thank you, sir.

WHITFIELD: Mr. Brost, if you would turn to Exhibit 107. This is a document from Action Research Group showing a request made by Security Outsourcing Solutions to Action Research Group for phone- related records, as well as the corresponding, completed order.

WHITFIELD: On page 11 of this exhibit is a handwritten note from you to an Action Research employee providing subscriber information requested by Security Outsourcing Solutions.

Mr. Brost, did you obtain and sell to Mr. DePante consumers' personal phone records that you obtained through pretext, lies, deceit or impersonation?

BROST: Most respectfully, on advice of counsel, I wish to invoke my Fifth Amendment right.

WHITFIELD: And is it your intention to assert your Fifth Amendment right on any additional questions we may have?

BROST: Yes, Mr. Chairman.

WHITFIELD: If there are no further questions for members of the committee, I'll dismiss you at this time, subject to the right of the chair to recall you if necessary. And at this time, you are excused.

BROST: Thank you.

WHITFIELD: Ms. Preston, if you have the exhibit book and document book, on page 3 of exhibit 107, this is an e-mail from you to Action Research Group which provides telephone subscriber information requested by Security Outsourcing Solution.

And pages 4 through 7 of that document also contain e-mails in which you provided personal phone records to Action Research.

Ms. Preston did you and your company, In Search Of, Inc., obtain and sell to Mr. DePante consumers' personal phone records and other phone-related information that you obtained through pretext, lies, deceit or impersonation?

PRESTON: Mr. Chairman, I respectfully invoke my Fifth Amendment right at this time.

WHITFIELD: And is it your intention to assert that right for any additional questions we may have for you?

PRESTON: Yes, sir, at this time.

WHITFIELD: Given that, if there are no further questions from members of the committee, I'll dismiss you at this time, subject to recall of the chair if necessary.

And at this time, you're excused.

WHITFIELD: Mr. Wagner, if you would please turn to exhibit 112, this exhibit contains three e-mails that you sent to Action Research Group in February 2006.

The first e-mail includes two pages of Marion Keyworth's, detailed personal phone records. The second e-mail includes two pages of detailed phone records for the landline phone in George and Marion Keyworth's home. The third e-mail includes two pages of detailed phone records for the Keyworth's fax machine.

Mr. Wagner, did you obtain and sell to Mr. DePante consumers' personal cell phone records that you obtained through pretexts, lies, deceit or impersonation?

WAGNER: Mr. Chairman, I respectfully invoke my Fifth Amendment right.

WHITFIELD: And is it your intention to assert that right for any additional questions we may have for you?

WAGNER: Mr. Chairman, I feel I have information that could help the subcommittee in their quest to really make this illegal, but there's certain questions that I would not want to answer, of course.

WHITFIELD: But you're asserting your legal right, your Fifth Amendment right for all the questions we may ask today.

WAGNER: Yes, Mr. Chairman.

WHITFIELD: If there are no further questions from members of the committee, this...

(UNKNOWN): Mr. Chairman?

WHITFIELD: Yes?

(UNKNOWN): Before we let this witness go, would you inform the subcommittee of who the Keyworths are, since you asked the question?

WHITFIELD: Mr. Keyworth was a member of the board of directors of Hewlett-Packard.

(UNKNOWN): And he is the one, I understand, who is alleged to have leaked the information.

WHITFIELD: That's true.

And so, are you asserting your Fifth Amendment right?

WAGNER: Yes, Mr. Chairman.

WHITFIELD: OK.

If there are no additional questions from members of the committee, then we'll dismiss you at this time, subject to the right of the subcommittee to recall you if necessary. And at this time, you are excused.

WAGNER: Thank you, Mr. Chairman.

WHITFIELD: Mr. Kelly?

KELLY: Yes, Mr. Chairman?

WHITFIELD: If you would please turn to exhibit 111, this is an e-mail that you sent to Action Research Group in January 2006. The e- mail includes three pages of Dawn Kawamoto detailed phone records for the entire month of January. And I believe that Dawn is a reporter for CNET News.

Now, Mr. Kelly, did you and your company, CAS Agency, obtain and sell to Mr. DePante consumers' personal phone records that you obtained through pretexting, lies, deceit, or impersonation?

KELLY: Mr. Chairman, I respectfully invoke my Fifth Amendment privilege to decline comment at this time.

WHITFIELD: And is it your intention to assert your Fifth Amendment rights for any additional questions we may have today?

KELLY: Yes, sir.

WHITFIELD: If there are no further questions from members of the committee, I'll dismiss you at this time subject to the right of the subcommittee to recall you if necessary.

And at this time, you're excused.

KELLY: Thank you.

BARTON: Mr. Chairman?

WHITFIELD: Yes, Mr. Chairman?

BARTON: I've been on the committee for 20 years and I've been on this subcommittee for over half that time. I've never had a hearing where no witness gave an opening statement, where every witness took the Fifth.

It's odd to me that a practice that every one of the individuals just before us has, in various forums indicated was totally legal, has invoked their Fifth Amendment right against self-incrimination.

DEGETTE: Will the chairman yield?

BARTON: I'll be happy to yield.

DEGETTE: I agree with the chairman. And as a former lawyer myself, I cherish the right of witnesses to invoke their Fifth Amendment right against self-incrimination. It's one of our important constitutional provisions.

But it's very difficult for us in Congress to have an investigation where all the witnesses come in and, at the very last minute, inform the committee that they're invoking their Fifth Amendment rights.

It becomes almost the routine rather than the exception.

And while, in the corporate responsibility hearings, for example, I felt that there were many, many witnesses -- some of whom are now in federal prison -- who should have invoked their constitutional rights, in this case I would have to agree with the chairman.

And, furthermore, I would say I know it's not our staff's fault, but when you haul in a whole panel of people like this just to have them take the Fifth Amendment, I think it's a waste of the committee's time and resources and I think it's a waste of the witnesses' time and resources and legal fees.

I would hope we could work with witnesses in the future to prevent this kind of action.

BARTON: Reclaiming my time: Until this morning, indications were that only two individuals...

DEGETTE: Right.

BARTON: ... were going to take the Fifth Amendment, which they...

DEGETTE: That's exactly what I'm saying, Mr. Chairman.

BARTON: ... have the right to do.

And, Mr. Chairman, I would encourage you to work with the ranking member of this subcommittee. The information that's been put together in preparation for this hearing is very important and I would encourage you to work with the minority to make it available, the proper format, to the general public and to law enforcement authorities that are pursuing this case in other venues.

Because both staffs have worked very hard to prepare for this hearing. We've got voluminous information that I think is accurate and true information.

BARTON: And if we're going to put a stake through the heart of pretexting, we need to inform the public and make available the information that we've attained about just how prevalent it is and how obnoxious it is.

WHITFIELD: Well, thank you, Mr. Chairman. And it's certainly our intent to do that. And has been stated before by many of our members of this subcommittee and the full committee that it is our desire to move this pretexting legislation we reported out, and hopefully we can do that.

At this time I'd like to call to the witness table the second panel. And on the second panel we have Ms. Patricia Dunn, who's the former chairman of the board of Hewlett-Packard company of Palo Alto, California. We have Mr. Larry Sonsini, who's the chairman of Wilson, Sonsini, Goodrich & Rosati from Palo Alto, California. And we have Mr. Fred Adler who is with I.T. security investigation at Hewlett- Packard Company in Palo Alto, California.

I want to welcome you all to the witness table. We appreciate very much you all being with us this morning.

And as you heard remarks from the earlier panel, an oversight investigation, a subcommittee does take testimony under oath. And I'm assuming that none of you have any difficulty or objection testifying under oath.

WHITFIELD: If you would please stand and raise your right hand.

Do you solemnly swear that the testimony you're about to give is the truth, the whole truth and nothing but the truth?

Thank you very much.

You're now under oath and you also understand that is the rule of the committee and the House that you're entitled to legal counsel and Ms. Dunn, I would ask you, do you have legal counsel with you this morning?

DUNN: Yes, I do (OFF-MIKE).

WHITFIELD: Would you please turn your microphone on? I'm sorry. And introduce your legal counsel.

DUNN: Yes, my counsel is Mr. Jim Broznehand (ph) and he is here this morning.

WHITFIELD: And, Mr. Sonsini, I know you're an attorney, but do you have legal counsel with you this morning?

SONSINI: Yes, I do. My counsel is Mr. Evan Chestler (ph).

WHITFIELD: Mr. Chestler (ph), thank you.

And Mr. Adler, do you have legal counsel with you this morning?

ADLER: Yes, I do. Mr. Malcolm Segal (ph), seated directly behind me.

WHITFIELD: Mr. Segal (ph). Thank you.

Well thank you very much for, as I said, being with us, and for introducing your counsel. And at this time, Ms. Dunn will recognize you for five minutes for your opening statement.

DUNN: Mr. Chairman?

WHITFIELD: Be sure and turn your microphone on.

DUNN: Thank you Mr. Chairman and other distinguished members of this committee. I do appreciate the opportunity to appear before you today.

All corporate directors have a solemn duty of confidentiality to their fellow directors and to the shareholders they serve.

Boardroom leaks create unfair advantages for some shareholders over others because stock prices can move on the unauthorized disclosure of information.

Leaks corrode the trust that is fundamental to board functioning and expose companies to regulatory sanctions under the Fair Disclosure Rules of the SEC.

When the H.P. board asked me to accept the position of non- executive chairman early last year, I expected challenges. But I never anticipated that the circumstances currently surrounding H.P. could ever occur.

One of the first challenges I faced came from requests made by directors to continue efforts to identify the source or sources of leaks that were undermining the board's functioning.

DUNN: I took this mandate seriously because the leaks touched the very heart of the company's most sensitive issues.

As detailed in my written testimony, I sought the advice of Bob Wayman, the company's CFO and then acting CEO, whom I respect greatly. He was the logical person to consult because all of H.P.'s control functions, including its legal and security groups, reported to him.

He referred me to Kevin Huska, who had responsibility for global security, who in turn referred me to Mr. Ron DeLia, about which I have explained in detail in my written testimony.

In my two or three conversations with Mr. DeLia over the ensuing weeks and months, I learned that checking telephone records was a standard investigative technique at H.P., and that they were drawn from publicly available sources.

The first leak investigation, from April to August 2005, failed to identify those responsible, but major new leaks occurred in January 2006.

These involved another publicly traded company, CSC, whose stock price may have been impacted by as much as 8 percent.

This raised the possibility of securities law violations.

Mr. Hurd and I concurred that a renewed investigation was in order. Ms. Baskins advised on this matter from the start. I recommended that the company use an outside firm such as (inaudible) Associates to perform the investigation. However, Ms. Baskins felt strongly that the investigation should be performed by Kevin Hunsaker, who reported to her and who had responsibility for business conduct and ethics investigations.

Mr. Hunsaker brought in the same underlying investigative team, including Mr. DeLia, in the second investigation as had been used in the first, when Mr. Huska was involved.

His final draft report was distributed to me and Mr. Hurd in mid- March.

Throughout the process, as detailed in my written testimony, I requested and received assurance that the investigation was being performed in the H.P. standard way, legally and properly. That this was the case was reiterated in Mr. Hunsaker's final report.

In April, the report was reviewed by Mr. Sonsini and the chairman of the board's audit committee, who presented a summary of the report which identified the director responsible for the leaks to the board in May.

In late June, I became aware from Mr. Sonsini that former Director Tom Perkins had raised concerns with him about the investigation a month or so after he had resigned from the H.P. board.

Mr. Sonsini attempted to allay Mr. Perkins' concerns after consultation with Ms. Baskins, concluding in a January 28th e-mail that, quote, "The process was well done and within legal limits," unquote.

In late August 2006, Mr. Sonsini advised the board that its techniques were, quote, "Not generally unlawful," unquote.

I am neither a lawyer nor an investigator. And in this matter, I relied on the expertise of people in whom I had full confidence, based upon their positions with the company and my years of experience in working with them.

I deeply regret that so many people, including me, were badly let down by this reliance.

I would like you to know that I was a full subject of this investigation and I, too, was pretexted.

Based on my experience, I hope that Congress will help companies like H.P. and people who find themselves in my position, as well as the targets of investigations, by establishing bright-line laws in this area.

DUNN: In addition to protecting privacy, I hope that Congress enacts legislation to help companies protect themselves from threats arising from serious or repeated breaches of confidentiality through sanctioned legal means, perhaps through investigations that can be conducted by the SEC.

I appreciate the opportunity to appear before you. And I look forward to you questions.

WHITFIELD: Thank you very much, Ms. Dunn.

At this time, Mr. Sonsini, you're recognized for five minutes for your opening statement.

SONSINI: Thank you, Mr. Chairman, members of the committee. It is an honor to be asked to appear before you today. I want to thank my client, Hewlett-Packard, for authorizing me to answer your questions.

I therefore believe that I can address the issues presented by these hearings without violating any confidentiality obligations that I have to them.

First let me explain my law firm's role in these matters. We were not involved in the design; we were not involved in the conduct of the so-called Kona I or Kona II investigations.

Indeed I was not even aware of them when the investigations were being conducted. Hewlett-Packard asked my law firm to provide legal advice to the board of directors, after the investigations had occurred.

With respect to the subject of your hearing, in my opinion, the use of pretexting and similar intrusive investigative methods in these circumstances is plainly wrong.

They should not be used by businesses or others, no matter what the purpose. I know this as well as anyone, since public reports have indicated that my own records may have been obtained, using pretexting, in this investigation.

When we were asked by the Hewlett-Packard board of directors to investigate the matter, we told the board that, although, generally, pretexting, except in the instance of financial institutions, was not specifically unlawful, we could not confirm that the methodologies used in the investigations were legal.

It seems to me that a positive outgrowth of the recent troubles at Hewlett-Packard would be passage of legislation governing such conduct.

Although pretexting is clearly wrong, unethical and improper, the law is not as clear as it needs to be. As Mr. Chairman said in his opening statement, it is probably illegal. We need to make it clearly illegal.

Having said that, the importance of preserving confidentiality within the boardroom should not be minimized. The dominant trend in corporate governance in recent years has been to enhance the role of boards of directors, the role of not only oversight but also the obligation to monitor management.

SONSINI: Boards across the nation have risen to this challenge. But a board cannot function effectively to safeguard the shareholders' interest if its most sensitive deliberations are leaked to outsiders.

A board's duty of deliberation, a board's duty of care, a board's duty of candor, is greatly weakened without confidentiality.

Finally, in all the recent coverage about the disputes within Hewlett- Packard, I feel that some have lost sight of the underlying greatness of the company involved.

The mistakes made in handling the investigation -- and there were mistakes -- do not alter the fact that H.P. remains a company that we can all be proud of.

I look forward to answering your questions to the best of my ability, and thank you again for this opportunity to make this statement.

WHITFIELD: Thank you, Mr. Sonsini.

Mr. Adler, you're recognized for five minutes.

ADLER: Good morning. Mr. Chairman and members of the committee, my name is Fred Adler. I'm with H.P., I.T. Security Investigations, and I'm here at the invitation of the committee.

No subpoena was required to compel my attendance. My fellow employees and colleagues at Hewlett-Packard have encouraged me to attend this hearing, as have my employers.

I believe, as do my friends at Hewlett-Packard, that the company has a tradition of being an outstanding and ethical member of the community.

From the recent public disclosure of possible inappropriate conduct, I'm sure that Hewlett-Packard will become a stronger company. I will be proud to continue to work there.

In order to assist the committee in evaluating my testimony, I would like you to know my background.

I spent 28 years working for the California Attorney General's Office, Department of Justice, and retired before joining Hewlett- Packard.

The last 13 years at the Department of Justice, I served as a law enforcement officer.

The last seven years of my service, I was assigned to the Sacramento High Technology Crimes Task Force, responsible for investigating computer-based criminal activity.

ADLER: I joined H.P. after my retirement, knowing that many of the people I would be working with at H.P. were former colleagues who had outstanding careers in law enforcement investigating technology- related issues.

In the time that I've worked for the company, we successfully protected the company, its customers and vendors from criminal activity. When requested, we've also assisted law enforcement in investigating crimes when our particular expertise was needed.

I'm proud of our record and of our relationship with law enforcement. I am proud of the ethical standards that the company has set and my maintaining those standards.

Because of the pride I take in our company, earlier this year I became uncomfortable when I learned of investigative techniques being used by certain members of the unauthorized disclosure investigation team with whom I worked during the investigation of leaks to the press. Those leaks had divulged important corporate information.

In order to appreciate concerns that arose during the investigation, one must understand the legal issues surrounding the collection of relevant information. People that work at Hewlett- Packard, as at other corporations, sign a user agreement which permits the company access to data which resides on the company network. This includes data on desktop computers, laptop computers, e-mail accounts, servers and also includes corporate telephone records.

If so tasked and specifically authorized, I have access to those accounts and can track the pertinent calls, e-mails and contacts for investigative purposes.

In that process, it may be helpful to know the phone numbers or e-mail identity for the employee or corporate officer or other key persons.

ADLER: The information we used to make our inquiries must comply with legal standards. If we wish to obtain third-party data, we must, and do comply with the law.

As a result of our law enforcement experience, we usually know what standards apply. In this instance, when we grew concerned that legal standards may not have been met in obtaining personal phone records, a co-worker and I brought the matter to the attention of our managers.

My manager, a former law enforcement officer, appreciated our concerns and raised them with counsel. We were all subsequently assured by counsel everything being done met both federal and state legal standards.

We were advised that this opinion was the result of a review by at least two attorneys. I understand those opinions have since been questioned. I'm not an attorney and I can't pass judgment on that issue.

I do believe, as a former law enforcement officer, it's important that the law be clear, so everyone knows its limits. If the problem that brought us here today starts the process of clarifying the law, some good will have occurred.

H.P. and its exceptional employees will get past this difficult period. It is a strong company with loyal customers and clients.

In the meantime, I am pleased to assist the committee by answering questions and providing information, particularly if it helps in passing legislation which will clarify the law. Thank you.

WHITFIELD: Thank you, Mr. Adler.

And we appreciate the testimony of all three of you witnesses.

And, Ms. Dunn, I think all the evidence and documents and even your testimony show that, as chairman of the board of Hewlett-Packard, that you were certainly involved in this investigative process.

And you had mentioned in your opening statement that you thought these phone records were publicly available, that they were just available to the public.

And I was just curious. I know you've had a broad range of experiences and have been quite successful in your corporate life. But where did you feel like, that people could obtain phone records and private information like that, publicly?

DUNN: Mr. Chairman, I did not know where this information could be found publicly. But I was aware that the kind of investigation done by Mr. DeLia had previously been based on solely publicly available information.

In the context of my understandings from all of those whose representation I trusted, I took the understanding without any question and I understand why that might seem strange today, knowing what I know now. But that was my state of mind at the time.

WHITFIELD: And Mr. DeLia, in some of his documents, which I won't ask you to turn to right now, but he stated that back in 2005, in discussions with you and others, that he discussed the methodology of pretexting and what that was all about. Do you recall a discussion with him back in 2005 about the subject of pretexting?

DUNN: I have no recollection of a conversation with Mr. DeLia that included the word "pretexting" or anything about the misrepresentation of identity to obtain phone records. In fact, the first time the word pretexting entered my consciousness was at the time when Mr. Sonsini began responding to Mr. Perkins' concern in late June of 2006.

The word, as some members of this committee have already said in their statement, is not one that was commonly understood as to its meaning, or, certainly, its potential illegality.

WHITFIELD: Now, when Ms. Baskins was on the panel, I asked her about some notes that she made on June 15th of 2005.

And in her notes -- and this is in Exhibit 124 of the exhibit book -- these are notes of Ms. Baskins. And the very first note says: Obtaining phone numbers is a time-consuming process. Call carriers Nextel, Spring and use pretexting to extract the information. And then they have your initials down here of questions that you asked.

Do you recall being at the meeting reflected in the notes of Ms. Baskins back in June of 2005 about pretexting?

DUNN: I do not recall being in that meeting. I assume it was a telephone meeting, but I do not know. She may have been passing along questions from me, but I don't have a recollection to report to you.

WHITFIELD: So your comment to this committee, then, is that the first time you really heard the word "pretexting" or understood what it meant was in Mr. Larry Sonsini's e-mail in June of 2006?

DUNN: That was the first time that the word jumped out at me. And it was within days or certainly weeks that I began to understand that pretexting could involve the fraudulent misrepresentation of identity.

That was not something that I had understood until that point.

WHITFIELD: Because as I mentioned to you earlier, in Exhibit 115, Mr. DeLia, in an interview conducted by the law firm of Wilson Sonsini on August 21st, 2006, he said himself that he had no doubt that he had discussed the methodology of pretexting, including impersonation, with you. But your testimony is you simply don't recall that or are not familiar with it.

Is that correct?

DUNN: Well, at minimum, I don't recall it. I don't agree with Mr. DeLia's testimony.

WHITFIELD: OK.

Now, Mr. Sonsini, I know that you're one of the most respected attorneys in Silicon Valley. And I know that your expertise is not criminal law. And I know that some of these documents, as we went through this process of Kona I and Kona II, and while your firm was not really involved in it per se, you had sent some e-mails or made some comments that appeared it to be proper -- what was going on. Is that correct?

SONSINI: Yes it is, Mr. Chairman. I believe you're referring to an e-mail exchange with Mr. Perkins. And if you would like, I'd like to elaborate on that.

WHITFIELD: Go ahead.

SONSINI: Yes. Well, at the time, Mr. Perkins inquired of me through the e-mail what was going on. I think it's important to note that I, too, at that particular point in time, did not understand pretexting. It's not an area of my expertise.

I immediately turned to Ms. Baskins and Mr. Hunsaker. I said: We should tell Mr. Perkins what was going on. He was a director at the time in the investigation. And I said: What can you tell me to respond to him?

I got a detailed written response from Mr. Hunsaker telling me what was done and what was lawful. I got a confirming response from Ms. Baskins.

And as my e-mail indicated, I then took that information and immediately went to Mr. Perkins. And I said to him: Here's what I've been told. And I said: It appears, based upon the repeated assurances that I was given, that what was done was within legal limits.

And that was the extent of my communication with him.

WHITFIELD: Now, either one of you, are you aware of any document prepared by a legal counsel within Hewlett-Packard about the legality or illegality of pretexting?

WHITFIELD: And Ms. Dunn, did you receive a legal document explaining that pretexting was legal?

DUNN: I never received a formal legal opinion, but, in Mr. Hunsaker's final draft report of March 14, on the investigation, as was also contained in the final report in May, he made it very clear, after laying out all of the investigative methods, that each of them were legal and proper and in conformance with the standard investigative techniques that the company had been using for years.

WHITFIELD: Because I tell you, from our review of the documents -- and there's been a lot of documents of the staff -- we've determined that the only legal opinion ever given was by the attorney for the private investigator in Boston -- what was his name?

Yes, Ron DeLia, for his -- John Kiernan (ph) was the attorney's name -- and that he wrote an opinion, saying that pretexting was legal.

And in further analysis, we've determined that, actually, a law clerk wrote that opinion.

So it would appear that Hewlett-Packard, at the very highest levels, relied upon a document prepared by a law clerk hired by the private investigator, saying that pretexting was legal. That's what it looks like.

DUNN: I think you'll also find, in the documentary evidence, that there was a memo to the effect that pretexting, indeed all the investigative techniques used in this matter, were legal.

I was not familiar with the second opinion, if that may be termed...

WHITFIELD: Which e-mail was that, now that said it was legal?

(CROSSTALK)

DUNN: It has not been produced by the company.

WHITFIELD: Oh, it has not been produced by the company? Oh, OK.

But did you have it at the time?

Or when did you receive that?

DUNN: I need to refresh my memory on the date of that. And I would be happy to come back to you with that answer.

WHITFIELD: If you would turn to Document 83 and if you would look at that and tell me, is that the document that you're referring to?

DUNN: In which section, sir?

WHITFIELD: The large book, Document 83.

DUNN: May I have a moment to review this?

WHITFIELD: Sure. You don't recognize it, right off?

DUNN: This was a memorandum from Mr. Hunsaker to Mr. Gentilucci and Mr. DeLia. It says it's prepared at the direction of counsel.

WHITFIELD OK.

The only question I was asking: Is this the document that you relied upon that showed that pretexting was legal? that's all I want to know.

DUNN: I do not recall seeing this e-mail before this moment.

WHITFIELD OK. OK.

Just one other brief question, and I will move on.

Mr. Sonsini, I want to ask you this: California Penal Code 538.5 reads as follows, that it "prohibits fraudulently obtaining information from a public utility" -- and it's our understanding that in California a public utility is considered a phone company among other things -- "that this statute makes it unlawful for any person to transmit or cause to be transmitted by means of wire, radio or television communication any words, sounds, writings, signs, signals or pictures for the purpose of furthering or executing a scheme or artifice to obtain from a public utility confidential, privileged or proprietary information; customer records; billing records; customer credit data or accounting data by means of false or fraudulent pretenses, representations, impersonations or promises."

That almost seems like it definitely is right on line with what we're talking about.

SONSINI: No doubt, Mr. Chairman, although I'm not an expert or familiar with that statute, we did so, when we investigated the legality of the investigation, conclude that methods may very well have been used which implicated that statute.

WHITFIELD: OK.

My time's expired.

I recognize the gentlelady from Colorado for 10 minutes.

DEGETTE: Thank you, Mr. Chairman.

Ms. Dunn, you've been involved in the corporate world for over 30 years, as near as I can see. Is that correct?

DUNN: That is correct.

DEGETTE: Have you ever had occasion to request or direct this type of investigation into corporate officers or employees before?

DUNN: Nothing of this kind.

And if I may, I would like to correct the record as is contained in my written testimony that I was not the person who hired Mr. DeLia.

DEGETTE: OK. I understand that. But you were the one who requested the investigation. Correct?

DUNN: I was operating as nonexecutive chairman.

DEGETTE: Yes, I know that.

DUNN: No, no.

DEGETTE: I want to ask you, Mr. Sonsini -- and I apologize. I don't mean to be short, but I only have 10 minutes.

Mr. Sonsini, I want to ask you because you're one of the most prominent Silicon Valley lawyers. We even have heard of you in Colorado.

(LAUGHTER)

My question to you is, as outside counsel for many of these corporations, is this standard business practice in the industry, where leaks or other kinds of breaches are suspected, to have investigations of this type? Is this something you've dealt with?

SONSINI: I have never dealt with an investigation of this kind of a board of directors with respect to a leak of confidentiality information.

DEGETTE: Have you ever seen any kind of investigation of confidentiality leaks, whether a board of directors or other types of employees of a corporation where you have pretexting? You ever seen that?

SONSINI: I have not, to my knowledge, no.

DEGETTE: Have you ever seen investigations that involved going through trash of corporate officers, directors or employees?

SONSINI: Not to my knowledge.

DEGETTE: You ever seen investigations where it involves coming up with fake employees in order to get information from reporters?

SONSINI: Not that I have ever...

DEGETTE: So this is news to you as well.

SONSINI: Yes, ma'am.

DEGETTE: Now, Mr. Sonsini, as outside counsel to H.P., were you briefed or were you consulted about the scope of this investigation and the methods used?

SONSINI: No.

DEGETTE: Were you provided with the draft of the investigation report which is dated on March 10th, 2006. It's in tab 72 of your notebook.

SONSINI: I think you're referring to a report I'm familiar with.

Yes, it was provided to me on or about April 6th of 2006.

DEGETTE: OK. On page 3 of that report, it says -- they're talking about the procedures that they used, and they talk about "obtained, reviewed and analyzed H.P. and third-party phone records to identify calls made to or from reporters or other individuals of interest."

And then there's a footnote that says the investigation team utilized a lawful investigative methodology, commonly (ph) utilized by entities such as law firms.

Did that raise any red flags to you?

SONSINI: Well, I remember it. And I certainly did focus on that footnote.

At the time I had the report, of course, I was asked to deal with the issue in the boardroom -- what do we do with Mr. Keyworth? I wasn't asked at that time to investigate the investigation, and I'm certainly not an expert in such matters, so it wouldn't be sent to me.

DEGETTE: But you said you focused on the footnote. Were you concerned about what those techniques were to obtain the phone records?

SONSINI: I was concerned by the scope of the investigation, as evidenced by the report, and I did focus on that footnote.

DEGETTE: And what did you do about your concern?

SONSINI: At that point in time, I did nothing further. I had discussions with Ms. Baskins. I asked her about the performance of the investigation and its legality. I asked her did you rely upon experts? Did you get legal advice? Did you research it? And I was assured that they did.

DEGETTE: Because, see, it sort of seems to us up here like it was kind of circular reasoning, because Ms. Dunn said, look, I was just asked to stop the leak, but I wasn't in charge of the actual conduct of the investigation. Right, Ms. Dunn?

DEGETTE: Is that correct?

DUNN: I did not supervise this investigation.

DEGETTE: Right.

DUNN: I initiated it at the request of the board.

DEGETTE: So, then, general counsel, Ms. Baskins -- who, unfortunately, is not testifying -- she talked to her experts and they say: Well, this is all OK. Then she asks you, and then you're relying back on Ms. Baskins. Is that right, Mr. Sonsini?

SONSINI: No, she never asked me. At the time I got the report, I was not asked whatsoever. The fact is this investigation was conducted by the Hewlett-Packard legal department.

DEGETTE: Right.

SONSINI: They took the responsibility on, I learned of it after the fact, after it had occurred, and it wasn't until the board of directors asked me to investigate it that I was able to get into the legality of the conduct.

DEGETTE: OK. Let me move on a little bit. And I want to ask you, Ms. Dunn, about something else that happened, which I think is just almost as bad as the pretexting, and that's the creation of this fictitious character named Jacob.

Jacob was a fictitious employee of H.P. who was designed principally to find out about the potential sources of an outside reporter named Dawn Kawamoto.

Now, you're familiar -- at least, now -- with this operation, correct?

DUNN: Yes, I am.

DEGETTE: Do you know; is it common practice for H.P. to create fake disgruntled employees to sting outside reporters?

DUNN: I do not know what normally goes on except what I have been...

DEGETTE: Do you ever hear about that kind of operation?

DUNN: It would not come to my attention. If it were the case, as a non-employee, non-manager, outside director, I really can't answer your question in a way I think you need it to be answered.

DEGETTE: Well, except for you're the one that ordered the investigation, right?

DUNN: I initiated it at the request of the board. I was non- executive chairman and I would like to just add, this is an unusual position in corporate America. Less than 9 percent of companies have a position like this. I had no staff, no office and I reported only to the board. The CEO doesn't report to me, nor do any other people at H.P.

DEGETTE: I understand that. But, if you take a look at Tab 60 in your notebook -- actually, take a look, first, at Tab 21 in your notebook, where Mr. Hunsaker says to Mr. Gentilucci we definitely need to get the approval of Ann, Mark and Patty before doing this. And this would be the Jacob operation.

You've seen that e-mail, right?

DUNN: I have.

DEGETTE: And then, if you take a look at Tab 60, on February 22nd, 2006, Mr. Hunsaker sent you and Ms. Baskins an e-mail that says, "Hi, Ann and Patty, below please find the e-mail we propose sending Dawn Kawamoto with the hope she would forward it to George Keyworth. I made up everything in the slide, trying to make it at least somewhat feasible. And it goes on, correct?

DUNN: I recall the e-mail.

DEGETTE: And you saw that at the time, too. So you knew this operation was going on at the time.

DUNN: I knew -- yes.

DEGETTE: Yes, you did. And did you think there was any problem with that -- someone pretending to be someone named Jacob, sending e- mails to a reporter to try to get information from a reporter as to a leak within the board?

DUNN: At no time in any part of this investigation was I responsible for designing its methods. I asked for...

DEGETTE: Right, but you knew about the...

DUNN: I asked for this to be done in the H.P. standard way. This did raise a concern to me. I did not want to be, at any point, the person to whom the team turned for approval of specifics.

The way I responded was to say: This is a management thing.

DEGETTE: OK, I understand that. But you ordered the investigation. You knew these techniques were being used. You developed a concern. What did you do about it?

DUNN: I sent the team to management to get approval for their techniques.

DEGETTE: Who was that in management?

DUNN: Mr. Hurd.

DEGETTE: So do we have an e-mail or some kind of communication?

DUNN: I think there is some evidence that he was aware of this.

DEGETTE: OK. What did you say to Mr. Hurd about this Jacob situation?

DUNN: I don't remember a conversation. I remember telling the team that, basically, they had come to the wrong person for approval. That was not my role in this matter.

DEGETTE: So you knew this was going on. You're the one that ordered the investigation. You had concerns. So your response was to send them over to talk to Mr. Hurd, but you yourself didn't mention it to anyone?

DUNN: If I were going to have a concern, it would be expressed to Mr. Hurd.

DEGETTE: So did you express it to Mr. Hurd?

DUNN: I asked him to look into it and to give his opinion.

DEGETTE: And did you ever get an opinion from him?

DUNN: I understand that he did give a -- I don't know whether it was verbal, in e-mail or by an in-person meeting, but that they gained the approval they were seeking.

DEGETTE: OK.

Mr. Sonsini, in this draft investigation report which you had said that you saw, Tab 72, a minute ago, they talk about this Jacob situation on page 4 of that report, which you saw. They say they engineered and executed a covert intelligence-gathering operation.

Were you familiar with that?

SONSINI: No, ma'am.

DEGETTE: So you didn't read that part when you read...

SONSINI: I read it, but I wasn't familiar with it other than what was...

DEGETTE: Did you have any concerns that H.P. might be using a fake person to get information from a reporter?

SONSINI: Congresswoman, at that time, that was not my focus that I was retained to do.

DEGETTE: Thank you.

WHITFIELD: The gentlelady's time has expired.

At this time, I recognize Mr. Barton.

BARTON: Thank you, Mr. Chairman. I'm going to take my full 10 minutes and then I assume we'll recess to go have the votes on the floor?

WHITFIELD: That's correct.

BARTON: First of all, I want to thank you three for not taking the Fifth Amendment. It's good to have some people willing to answer questions.

I want to start with you, Mrs. Dunn, or Ms. Dunn. You claim that your position is one that is somewhat unique in that you don't have direct staff.

Who does report to you?

DUNN: No one.

BARTON: No one?

DUNN: No one.

BARTON: So you're purely an administrative adjunct of the board?

DUNN: As part of my written testimony, I submitted the job description for the nonexecutive chairman that was approved by our board.

And it is very clear. It's a coordinator role. It's a facilitator role. It's a conduit between...

BARTON: But you have no direct management responsibility?

DUNN: No, none.

BARTON: You're purely a functionary of the board?

DUNN: I served at the pleasure of the board.

BARTON: Did you sit in on the board meetings?

DUNN: I chaired the board meetings.

BARTON: You chaired the board meetings?

DUNN: I did chair the board meetings until my resignation last week.

BARTON: All right. Now, this whole investigation got started because there were leaks from materials presented in board meetings and perhaps leaks of discussions at board meetings.

Is that correct?

DUNN: That is correct, sir. And in the (inaudible), there is a detailed chart of some of the leaks that were the most serious and undermining to our company.

BARTON: Well, I appreciate that. But I don't have too much time. The board was divided, or was the board unified?

Was the Hewlett-Packard board that you chaired a team that worked together, or were their schisms on the board and quite a bit of controversy?

DUNN: After I became chairman, I became highly cognizant of deep schisms between various individuals on the board.

BARTON: So some of the board members, or member, or members, apparently took materials that were requested to be confidential and disseminated, without permission.

BARTON: What steps did the board take, before you resorted to all of this sordid detail, to try to get the board members to fess up? Did you all discuss it in the board? And if so, did everybody put the hand on a Bible and swear they weren't the leaks?

DUNN: Yes. The first inquiry into leaks actually began under the administration of Carly Fiorina, who was chairman and CEO until February of 2005. She asked Mr. Sonsini to talk with every director one on one about the functioning of the board and to seek the confession of whoever the person or persons were that were leaking this confidential information, as well as to reassert their commitment to confidentiality going forward.

The reason why the board, by the time I got involved, was so deeply concerned was because they knew that no one had come forward to admit their culpability.

BARTON: How many board members were there?

DUNN: I believe there were nine independent directors at that time, including myself.

BARTON: And how many...

DUNN: And two members of management.

BARTON: Two members.

DUNN: One member until Mark Hurd arrived in April.

BARTON: And did the board take a vote to initiate the investigation? How were you directed to start this investigation?

DUNN: I was directed in one-on-one conversations, about which I have submitted my notes to this committee, by seven of the nine directors that, next to hiring or helping the board to identify its next CEO, my top priority was to help the board come to grips with these leaks.

And I reported to the board, in my first meeting as chairman in March, that I took that responsibility seriously.

BARTON: So seven of the 11 board members told you...

DUNN: Seven of nine.

BARTON: ... individually -- but there was never a vote collectively -- to start this investigation?

DUNN: There was never a vote collectively.

BARTON: Was Mr. Keyworth one of the ones that told you to start the investigation?

DUNN: He was not.

BARTON: He was not.

So you started the investigation. And the first investigation, the Kona I, was inclusive. Is that correct?

DUNN: It was.

BARTON: And Kona I did not use pretexting?

DUNN: I believe it did use pretexting.

BARTON: It did use pretexting. OK.

DUNN: I'm sorry. I've just been corrected. I don't know.

(LAUGHTER)

BARTON: Well, that's a fair answer. I don't know a lot of stuff either. And that's OK every now and then, to not know.

But when did it arise to your attention that pretexting was being used? At what point in which investigation?

DUNN: Mr. Chairman, in the sense of the word that we're all using pretexting today, which is, the fraudulent misrepresentation of identity -- a form of identity theft.

This was not something I understood until early July of 2006 as a possible component of either investigation.

BARTON: OK. I just want to make sure that we understand.

We have a divided board. Somebody on the board is leaking information that the people that are not leaking it thinks is inflammatory.

So there is, kind of, a general investigation to get people to confess and stop their bad behavior.

That doesn't work, so a majority of the board, individually, says, "I want this stopped. I want to find out who's doing this and, by golly, you're the chairman of the board. You start this investigation."

DUNN: "You work for us. We need this work done."

BARTON: No. You go, apparently -- did you clear this with Mr. Hurd, the chief executive officer, who's going to testify next?

DUNN: He was not with Hewlett-Packard in the period when I was first named chairman.

BARTON: I see. Did you go to Mr. Adler down there and say: I want you do it? I mean, who did you -- did you go to Mr. Sonsini and say: I want you to do it?

DUNN: No.

BARTON: Who did you call to do it?

DUNN: I went to Mr. Bob Wayman, who is the long-serving CFO of Hewlett-Packard, arguably the CFO's CFO.

BARTON: Even though you had no direct management responsibility, you went to the chief financial officer of the company.

DUNN: He was a director at the company. He was a fellow director of the company who, in his role as a director and a fiduciary, was as concerned about these leaks as any other director.

BARTON: Is a director the same as a board member?

DUNN: Yes, it is, sir.

BARTON: So he was one of the board members who wanted to do the investigation?

DUNN: He was one of the seven, yes, sir.

BARTON: OK. And is he the one responsible, who hired these outside investigators to do the investigation?

DUNN: Not directly, but as noted in the reporting relationships chart, he had control over all of the functions that are involved in security investigations.

He directed me to someone in his organization who directed me to someone who does this work.

BARTON: And when these board members asked you to do this, or told you to do the investigation, when you went to Mr. Wayman, who was also a member of the board, was there any discussion about -- I mean, was this personal?

Was this, we want to get 'em, whatever it takes, do whatever it takes, or was it, we'd like to know, but we don't really want to cross any boundaries?

DUNN: There was never any question in my mind that the board expected this investigation to be done, not only legally but ethically.

BARTON: OK. Well, if seven of the nine members wanted the investigation, I would start with the premise that the two that didn't were the primary suspects.

(LAUGHTER)

Was any extra consideration given to the two board members who didn't want the -- I mean, it would seem to me they were the ones most likely to be leaking information.

DUNN: I did provide background to the investigators, as I was told was the normal process in these matters, about who wished and who did not wish to have an investigation.

I, as I mentioned before, was one of those six or so directors whom the investigators decided was, among the board of directors, a likely suspect.

I saw myself as needing to be as independent of the investigation as possible so that they could do their work without the implication that I would not be considered.

BARTON: Mr. Adler, what's your role in this?

What is I.T. Security Investigations?

Is it a direct arm of Hewlett-Packard or is it on retainer by Hewlett-Packard?

ADLER: Mr. Congressman, I am under a completely separate entity within the Hewlett-Packard organization, and with no common point of management till Mr. Hurd.

My role was to participate with regard to obtaining internal H.P. records and to participate in the investigation as required or as directed by H.P. counsel, specifically Mr. Hunsaker. That may have included interviews or any other technical assistance, computer forensics, things of that nature.

BARTON: So you're an internal investigatory arm of Hewlett- Packard?

ADLER: Yes, sir. But in this particular circumstance, I was. Sometimes I function as the sole investigator, depending on the circumstances and where jurisdiction of the investigation falls under.

BARTON: Mr. Chairman, my time's expired and we have to go vote.

I just have one final question. If I called you up, Ms. Dunn, and said, "I'd like your phone records for the last six months. I'm Chairman Barton of the Energy and Commerce Committee, but I'd like to look at your phone log; would you please send me your phone log?," would you give me that?

DUNN: If I understood why you wanted it...

BARTON: No I called you up. Would you give me your phone records?

DUNN: In your position, I would give you my phone records.

(LAUGHTER)

BARTON: Well, praise the Lord.

(LAUGHTER)

I wouldn't give you mine.

(LAUGHTER)

DUNN: I hope that doesn't mean you have something to hide.

(LAUGHTER)

BARTON: No, ma'am. But I wouldn't give them.

If I get with former Chairman Dingell and he and I say, "We have reason to believe that we have an official right for the public to know your records," I can sign a subpoena, as chairman of this committee, with Mr. Dingell's acquiescence, and I can get your phone records. But I have to sign an official document. And I'm doing that in an official capacity. And I don't do that very often. I take that very seriously. I don't issue many subpoenas.

But if I just want to peruse your background, I can't do that as an individual citizen.

BARTON: And I shouldn't be allowed to without your permission.

And in this investigation, at some point and time, people very high up in your company either didn't ask the right question or ignored it because there was such a motivation to find out...

(CROSSTALK)

Nobody condones the leak. We have leaks on this committee.

DUNN: Mr. Chairman, may I make a comment on Mr. Barton's...

BARTON: Yes, and I'm going to have to go, but this whole issue of pretexting is -- we understand the right of confidentiality in a board room, and the right to conduct a private investigation. This committee is concerned because the use of the pretexting ignores what most people think is right and wrong.

DUNN: I understand that.

BARTON: That's our problem.

WHITFIELD: But then if you would hold your remarks, and then -- the reason I say that -- and we have like one minute and 20 seconds to go vote on the House floor. And we're going to have this vote and then we're going to have three more votes at a maximum of about five minutes each. So we're going to recess this hearing until about 1 o'clock and then we'll all come back and then you can make whatever comment you'd like to make at that time.

DUNN: Thank you, Mr. Chairman.

WHITFIELD: And we have a wonderful sandwich shop downstairs if you all want to get anything to eat.

Recess until 1 o'clock.

(RECESS)

WHITFIELD: The hearing will come to order.

At this time I'd like to recognize Ms. Schakowsky for 10 minutes.

SCHAKOWSKY: I want to also thank the witnesses for coming here today and being willing to testify. It really means a lot to us.

And one other preliminary remark. I want to associate myself with what Mr. Otter and Ms. Eshoo both referred to, because I want to get at the culture that is taking place in board rooms. But I think that we, as members of Congress, have to look at our own culture here, too, and the issue of the processes that we've worked in terms of NSA eavesdropping and getting phone records and the assertion of this administration that the ends, in a sense, do justify the means -- in this case, terrorism; in your case, a leak within the board of directors.

And I'm concerned about both, that we have ethical and legal processes that allow us to achieve ostensibly laudable goals, anyway.

But I think it is significant for us to talk about this issue of corporate culture. And I wanted to -- Ms. DeGette was talking about the e-mails on February 22nd, 2006, from Mr. is it Hunsaker, is that it, sent to you, Ms. Dunn and Ms. Baskins, about Jacob and about Dawn Kawamoto, the reporter, et cetera. And when he says, "I made up everything in the slide trying to make it at least somewhat feasible; I won't quit my day job," it was being light-hearted.

While your response did say that you said, as a matter of course, anything that's going to potentially be seen outside H.P. should have Mark's approval as well, et cetera, but you also said, "Kevin, I think this is very clever."

And I just wondered if you would comment on that.

DUNN: I will comment on that. I regret that comment. It doesn't characterize my state of mind. I may have been trying, in some kind of -- in retrospect -- inappropriate way, to tell the team that I thought they were doing a good job.

In reading that comment today, it embarrasses me.

SCHAKOWSKY: Thank you.

I also wanted to know, and it is Tab 29 in the book, a PowerPoint that says that it was an initial briefing...

WHITFIELD: Ms. Schakowsky, do you have the document book on the table?

DUNN: It seems to not be here any longer.

WHITFIELD: Could you all bring the document book over, please. Did you say document 29?

SCHAKOWSKY: Tab 29.

WHITFIELD: Tab 29.

SCHAKOWSKY: And on page 10 of that report, there are lists of either potential or ongoing investigative methods that are being proposed in this investigation. And I just wanted to walk through those a little bit and ask if you had approved them or heard about them or if they went forward.

Under the title "Surveillance Intelligence Operations," it reads "pre-trash inspection survey is in progress for key subjects for the investigation."

And I wondered if you knew that H.P. investigators were about to or were actually rummaging through the trash of certain individuals.

DUNN: The direct answer is no. The context is, this was a PowerPoint presentation that was given in a meeting room.

SCHAKOWSKY: You did see that presentation?

DUNN: I don't know that every page was actually shown. I was interested in Pages 12 and 13, which focused on the work that had been done to try and legitimately hypothesize who within our board could be responsible for these confidentiality breaches.

So to answer the question, "Did I focus on; did I know?," it's not even clear to me that this was put up on the screen. And I do not recall getting a hard copy of it.

SCHAKOWSKY: And did you know that Mr. Hurd -- do you have any knowledge that Mr. Hurd knew about these activities?

DUNN: I have no knowledge. I have no direct knowledge.

SCHAKOWSKY: In the same document, and that is -- I guess, in this one, too -- it says, "Surveillance activity was conducted for G.K." -- I guess that's George Keyworth -- speech in Colorado on January 31, 2006.

Did you know that H.P. investigators were using H.P. money to assemble surveillance teams for this board member and possibly press reporters at this point? And when did you know this? And who approved of this expenditure?

DUNN: I learned after this document -- and I can't pinpoint the date, but probably some time after the release of Mr. Hunsaker's report -- that a security detail from Hewlett-Packard, which normally attended company events, so not specifically for the purpose of surveilling Dr. Keyworth, had reported nonetheless, back to their chain that he had, on a number of occasions, disclosed confidential information orally to groups of employees who did not have authority to hear that information.

So it's not clear to me, now, that there were, for example, detail of surveillers to cover him specifically. But I am aware that -- now have come to be aware -- that actually, for several years, there were concerns among the security staff about his public comments and that they had reported some of them through the security chain.

In terms of who approved the -- if you'd still like me to answer that...

SCHAKOWSKY: Well, I just wanted to -- I mean, it included photographs of his home in Italy.

SCHAKOWSKY: Obviously, trips were taken. We know that Mrs. Keyworth was observed in Breeze (ph) Restaurant (inaudible). The family was also followed.

DUNN: I was unaware of all of those activities until I read about them in the press within the last week or two, as these documents started to find their way into the media.

SCHAKOWSKY: And for reporters as well, you weren't aware? Did you see the photographs of the reporter...

DUNN: No.

SCHAKOWSKY: Dawn Kawamoto...

DUNN: I would like to specify, I became aware that reporters had been pretexted by Ms. Baskins on, I believe it was September 6th. It was a Wednesday evening of this year, which is the first awareness I had that reporters had been pretexted as a part of this investigation.

SCHAKOWSKY: Now, this PowerPoint, and I understand you're saying that you're not sure that all the pages were being shown. But there is -- on page 15, it talks about other investigative options under review. We've got misinformation/sting scenario; covert undercover operations -- placement of agent in close proximity to persons of interest -- most likely location, news agencies.

I guess what I'm trying to get at in this line of questioning is all of this really the H.P. way? It's pretty well detailed out that whether or not -- I'm not even talking about the legality issues so much as kind of the sleaze factor here. And I'm just wondering if none of this really came through to you over the period.

DUNN: First, I have to say that I never remember seeing this piece of paper. It may or may not have been presented. My view is that it wasn't.

SCHAKOWSKY: Who failed you?

DUNN: May I finish answering your first question?

SCHAKOWSKY: Sure.

DUNN: Thank you, Madam Congressman -- Congresswoman. I never knew if I was "chairman" or "chairwoman" so.

(LAUGHTER)

The fact is that I believe that these methods may, in fact, be quite common not just at Hewlett-Packard, but at companies around the country.

Every company has a security department. Every company of consequence has people who do detective-type work in order to ferret out the sources of nefarious activities.

An example might be that, at Hewlett-Packard, one of the great problems that it faces worldwide is called gray marketing, where unauthorized agents for the company's products basically serve as a conduit between the company and channels of distribution. It's a huge problem.

And I've heard about, in the audit committee of Hewlett-Packard, how there are people in the investigations team who actually pose as customers or pose as suppliers or pose...

SCHAKOWSKY: As clerical workers in news rooms, too?

DUNN: That I had never heard. But my point is simply -- and I'll wind up -- that companies do a lot of this kind of work to protect the interests of their shareholders. And maybe we're all just coming to be aware of how common it is.

WHITFIELD: The gentlelady's time has expired.

At this time, I'll recognize Mr. Walden for 10 minutes.

WALDEN: Thank you very much, Mr. Chairman.

Ms. Dunn, I'm just having some trouble here tracking all this, based on what I'm reading in our documents binders and what I'm hearing today.

And I want to go back to make sure I understood, when we referenced the document that is in Tab number 124, the hand-written minutes or notes of Ann Baskins from a meeting of June 15th -- as I recall your testimony earlier today under oath, you said you didn't recall being in that meeting.

DUNN: I have no recollection...

WALDEN: No recollection.

DUNN: I've seen this for the first time now.

WALDEN: I'm not talking about whether you've seen this for the first time. Do you remember being part of that discussion?

DUNN: I do not.

WALDEN: Then I would direct your attention to Tab number 2. On Tab number 2 is a copy of an e-mail message from you to Ron DeLia in which you reference Kona. It is dated June 14th of 2005, the day before this meeting.

In that -- I'll read it -- it says: "Ron, I'd like to reschedule our call to include Ann Baskins, general counsel at H.P. (inaudible) the next couple of days. Ann is now involved in the confidentiality review, and it would be timely to compare notes and discuss where to go from here. Could you do it at 2 p.m. Eastern Daylight Time, tomorrow, Wednesday? And could we use your conference line? Regards, Patty."

WALDEN: June 14th. Do you remember that e-mail?

DUNN: I remember that e-mail, but without Ann's June 15th note, which has just been put in front of me. My recollection was incomplete. I haven't seen all the evidence here.

WALDEN: I understand you may not have seen her notes. My question was do you have any recollection of having discussion with any of these people that you set the meeting up for the next day?

DUNN: I will say one more time: I do not recall the June 15th discussion. If I connect these dots, it took place. But, as I...

WALDEN: The importance of that is because there was a discussion about pretexting that obviously went on in the meeting if Ann Baskins' notes are to be believed. Now you can understand the relevance of that to our discussion here.

DUNN: I do.

WALDEN: Then let me move you to Tab 116. This is a document that includes interviews with you from August 21st interview with you, conducted by Wilson Sonsini, who, apparently, you were not willing to contradict Mr. DeLia's statement that he shared with you the concept of impersonation to get records.

And I would note, it says, and I quote, "Dunn thinks it is probable that she was told in some circumstances that they may need to use false pretenses, but that she was always assured the methods used were lawful and consistent with H.P. practices."

And if you go to Paragraph 26...

DUNN: Could you point me to the number...

WALDEN: Oh, I'm sorry, yes. Paragraph -- the top of the page, actually, is Paragraph 25, but the first notation is Paragraph 26.

DUNN: I see it.

WALDEN: "Schatz explained that DeLia believed he'd shared with Dunn the concept of impersonation to get records. Dunn said she is not willing to contradict DeLia on this."

And then it goes on to say, "Dunn thinks it is probable that she was told that in some circumstances, they may need to use false pretenses, but she was always assured the methods used were lawful and consistent with H.P. practices.

Do you disagree with those findings?

DUNN: I disagree with the transcription Wilson Sonsini's lawyer of our interview, and I was never given an opportunity to review their notes.

WALDEN: Do you disagree with the notion that you were not willing to contradict Mr. DeLia's view of this?

DUNN: I remember what I said to Mr. Schatz was that I -- if Mr. DeLia said this, I had no recollection of it. I don't recall saying I am not willing to contradict him. That seems paraphrased.

WALDEN: OK. Mr. Sonsini, are you comfortable with what's reported here?

SONSINI: Yes, I am, sir.

WALDEN: And do you believe that Ms. Dunn was made aware of pretexting as a part of the investigation.

SONSINI: I believe that the notes taken by Mr. Schatz's senior partner in our firm, a former U.S. assistant attorney and federal prosecutor, accurately reflects his recollection of that interview.

WALDEN: What does probable mean? Where he says, he writes, Dunn thinks it's probable that she was told that in some circumstances, they may need to use false pretenses?

SONSINI: Well, I wasn't in the interview, of course, Congressman. But I think -- I shouldn't speculate on what that exchange was.

DUNN: I would like to try and interpret it if I may. I believe I told Mr. Schatz that it was possible that I had seen the word pretext, not that there were false pretenses that I was aware of, and the fraudulent misidentification of identity as part of this investigation.

The word pretext does show up in documents that I have been shown that I saw...

WALDEN: So, being here today, under oath, you're going to tell us you never knew that they were going to use these techniques to spy on board members and impersonation of others. You just never knew?

DUNN: It is my sworn testimony that until July of 2006, I was unaware that the fraudulent misrepresentation of identity was a part of the standard arsenal of H.P. tactics or used in this investigation.

WALDEN: In the document we have here, the interview of Ron DeLia, a draft from Wilson Sonsini Goodrich & Rosati -- I believe it's document number 115 -- talks about Kona I 2005 investigation.

And in number 4, on page 1, says DeLia has no doubt that he discussed methodology of pretexting, i.e., impersonation, with Dunn, at some point during the 2005 investigation.

Mr. Sonsini? This is on your company's -- your law firm's letterhead. Are you familiar with this document?

SONSINI: I am, sir.

WALDEN: And how should we understand that to be?

SONSINI: That document reflects, sir, the investigation we made and the information we received from the parties we interviewed.

WALDEN: Ms. Dunn, do you see why we're troubled by this?

DUNN: I do. I think there were -- there are also references in this document to my request and ongoing, both seeking and receiving of assurances that everything being done in this investigation was legal and part of H.P.'s normal investigative process.

WALDEN: But if they told you it was legal to lie about -- to impersonate someone to get documents, you didn't see a problem with that?

DUNN: I never understood that to be the case, sir.

WALDEN: Well, Mr. DeLia said he had no doubt he discussed the methodology with you. And so what you're saying is you don't believe him?

DUNN: I wish he were here so we could talk about it.

WALDEN: Ann Baskins' notes indicate that that was discussed as well. You dispute those?

DUNN: I dispute having ever understood or being told that the fraudulent use of identity was a part of this investigation.

And I would add that I had no reason to think that anything illegal was going on. There were batteries of experts telling me that that was not the case.

WALDEN: And I understand that you were advised that way and some of those batteries of experts are now looking for work. And I understand that.

(LAUGHTER)

I guess my question...

DUNN: I'm one of them.

(LAUGHTER)

WALDEN: I understand that as well. And there may be more, after you leave here today.

My question is, you indicated earlier, and some of these e-mails would indicate that, you know, you signed off and somebody -- and I don't if I've got that e-mail here, where it says, Patty and Ann gave the thumbs-up. Now we need to hear from Mark Hurd. Can you find that one?

WALDEN: I guess my question is, you referenced earlier that you're sort of there on the board as an outside director; you're the one that's sort of been tasked by seven board members, without a vote of the board, to secretly put together Kona I, Kona II. There's a lot of e-mail traffic back and forth, you know, this April 19th memo to a Ron DeLia, from you says, "Ron, Let's call this project Kona. Attached is the information we discussed. The phone numbers of all those present at the meeting referred to in the article."

I mean, these would lead me to believe you were very involved in this. Even without a staff, you were pretty active.

And my question is, the e-mail from Mr. Hunsaker, which is under tab number 51 to team from Kevin Hunsaker says "This is a tentative go. I've attached a document that purports to be an e-mail send to Jacob about an announcement taking place next week. Let's talk about the content on our call.

"After that, Fred, can you begin to prepare the document for sending? We cannot put this completely in motion until they clear it with Mark, but Ann and Patty have both given a thumbs up, so we should be preparing to send it if Mark approves. Kevin."

Do you remember that e-mail?

DUNN: I have read that e-mail. I don't agree with its characterization of my giving it the thumbs up. I said it needed to be approved by management.

WALDEN: DeLia, in another part of this interview on August 25th, DeLia -- it's on page 3 -- "In all probability," quote/unquote, "that he used the word pretexting with Dunn and explained the term to her, but he did not have a specific recollection of using the word.

"DeLia said he knows that he would have described the processes with Dunn, though he did not tell Dunn that he was using a subcontractor."

DUNN: Sir, I am here testifying under oath. Mr. DeLia is not. I think I will leave it at that.

WALDEN: Well, I'm not sure we can leave it at that.

Answer my question about Mark Dunn's (sic) role in this.

DUNN: Mark Hurd.

WALDEN: I'm sorry, yes. Actually I have a friend named Mark Dunn.

Mark Hurd -- what was his role? You've indicated you kind of deferred to him.

Can I least get an answer to the question, Mr. Chairman?

WHITFIELD: You can get an answer.

WALDEN: I won't ask any more.

DUNN: May I answer, sir?

The question was what was his role.

WALDEN: What was your understanding of his role in this approval process?

DUNN: This particular element of the investigation could not go forward without his approval.

WHITFIELD: And I might add that more than likely we'll have a second round as well.

Mr. Inslee, you're recognized for 10 minutes.

INSLEE: Thank you. I want to ask about tab 29, Ms. Dunn, about this document -- I think there's been some discussion about it already. It's identified as Project Kona II, H.P. It says, "initial briefing, Patty Dunn" on it.

INSLEE: On the title page it's dated February 2nd, 2000.

It's a rather extensive document. It's interesting in time. I introduced the first bill in Congress in this session to make it clearer and to have tools against pretexting on January 31st. Two days later, H.P.'s involved in a very significant effort that I think, as we go through this, will show a substantial willingness to defraud other people about the sources and how you were obtaining information. The timing is pretty amazing to me.

But I want to ask you about this document. It has your name on it. It's entitled "Project Kona II." And on Page 10 of the document -- I'll give you just a moment to get to Page 10 there.

DUNN: I think I was just asked to look at this page. And so I'm familiar with it right now.

INSLEE: Yes. Now this document, as I understand, was something like a PowerPoint or slide projection to you. Is that correct?

DUNN: Yes. That's how I believe it was used. It was projected during a meeting.

INSLEE: And on the title page it says it's for you. You were the subject. You were the audience of this document, this presentation, I assume. Is that correct?

DUNN: I remember that the meeting took place, that Ms. Baskins was with me. And, yes, I was the person who, on behalf of the board, was tasked with this investigation.

INSLEE: So on Page 10 -- are you with me there? Do you have that in front of you?

DUNN: I'm with you.

INSLEE: It's entitled "Investigation Activity Update." Now I have to tell you, I was impressed with this document -- with its extensive list of activities.

Surveillance intelligence operations -- intelligence-gathering effort to document communications for all subjects. Pre-trash inspection survey is in progress for key subjects. Pre-surveillance reconnaissance is in progress. Surveillance activity was conducted -- and there's a list.

INSLEE: And I want to ask you about this last one. It says, "Feasibility studies are in progress for undercover operations (clerical) in CNET and WSJ offices and S.F. in California."

Now, I would understand that to say that you were considering -- "undercover" to me is another way of saying that someone would be lying about their status, that H.P. was considering a method of having a person lie about their identity or their responsibility or their presence in some fashion. And in this case it was to CNET and to the Wall Street Journal.

So if my interpretation is correct, it appears to me that you had already stepped over the line of being willing to falsify the identity or the role or the responsibility of a person in order to obtain this information. Is that a fair statement?

DUNN: I don't think that is a correct inference. I am not in the mind, or was not in the minds of the investigation team. What they considered and what I saw are in many cases two different things.

I think you can probably appreciate what happens when you go into a meeting and someone's got a 30-page PowerPoint deck, and you've got limited time and you say, "Let's get to the meat of the matter here. I want to know who do you think did this. Let's go the analysis, what we know about who did this."

I remember focusing on Pages 12 and Page 13.

INSLEE: Today, for any C.O. in the land, if they see a document that says we are considering undercover operations against major media outlets in this country, don't you think that should be a red flag to say, should we be doing undercover operations to major media outlets?

INSLEE: And "undercover," to me, that means that someone is falsifying their identity or falsifying their responsibilities.

If you had -- are you telling us today, had you been aware of that, you would have stopped it, or are you telling us that you weren't aware of that, or are you telling us that you missed that, or are you telling us that you thought it was OK to think about undercover operations and you'd think about it later?

Which of those scenarios happened here?

DUNN: What I'm telling you is that I don't believe I saw this. I was not responsible for designing the techniques that Hewlett- Packard uses in investigations. And I will strongly affirm your statement that I advise, and I think this was what you just asked, other CEOs -- I was not the CEO but I would advise CEOs that, if anyone in their organization came to them with this proposal, that they take appropriate action to prevent it.

INSLEE: So if anyone actually -- what you're telling me is, anyone in the chain of command saw this proposal, they should have shut it down right there?

Is that a fair statement?

DUNN: I think that this would have been and should have been a trigger to review the investigative methods at Hewlett-Packard from the standpoint of, say, an internal audit review, to look for, on a risk basis, what was going on there that could put the company in jeopardy.

INSLEE: So while I was introducing a bill, on January 31, to give us the tools to stop pretext calling, which is an undercover device to obtain our personal cell phone information, what was H.P. telling Congress about whether or not we should have these tools to stop pretexting?

What were your lobbyists telling Congress?

DUNN: I don't know, sir. I'm not involved in H.P.'s lobbying efforts. I have no role in approving or even being informed about them.

INSLEE: And what is H.P. telling Congress now?

Should we pass this bill that this committee passed back in March?

What is your advice to us now?

DUNN: Sir, I think the right person to address that question to is Mark Hurd, who is an executive of the company. I am not, was never and have never been consulted about what H.P. does in its lobbying efforts with Congress.

INSLEE: Well, what's your personal opinion, if you have one?

DUNN: I do have one.

INSLEE: Do you think Congress should give the tools to agencies to stop pretexting Americans?

DUNN: Absolutely. Here's what I think -- and this is in my testimony and my opening statement -- I think that the privacy of individuals needs to be protected with crystal-clear laws.

I also believe that companies like Hewlett-Packard need to have a place where they can go to have investigations that are necessary to protect shareholder interests -- accomplished within sanctioned safe harbors.

Just like law enforcement carves itself out from pretexting laws, there needs to be a way for companies to do the kinds of investigations they need to protect intellectual property and, in this case, repeated, unconfessed, serious disclosure of confidential company information.

INSLEE: And do you have any information as to why the United States House of Representatives, having had a bill passed to solve this problem, introduced the same time this was going on at H.P., why the leadership of this House -- do you have any information -- won't schedule a vote on this bill? Do you have any information on why that is? Because, frankly, it's a mystery to me.

I have checked with the Intelligence Committees. They said, "We don't have a hold on this bill." I've asked my friends across the aisle. No one admits having a hold on this bill.

And I've got to tell you, my constituents are tired of a Congress where there's backroom holds put on bills by secret -- I don't know who they are -- trying to stop this scandalous behavior going on.

So I wonder: Have you got any advice about what's stopping Americans from getting this protection?

DUNN: Sir, if there's anything I know less about than the details of the law on pretexting or the methods that are permissible in investigations it's how the U.S. Congress passes bills.

(LAUGHTER)

INSLEE: Well, in this case, how they don't pass bills.

DUNN: Or how they don't pass bills.

INSLEE: That's the situation.

DUNN: But I would be happy to talk offline about what I can do, if anything, to help you in that matter. I think it's important.

INSLEE: Well, I hope corporate America, responsible corporations of which there are millions and millions, thankfully, in this country, will call Republican leadership in the House of Representatives and tell them to get this bill up on the suspension calendar and pass it.

I have some suspicion that maybe those calls aren't being made; maybe there are calls with a different message to GOP leadership.

I don't know what's going on here, but I hope that responsible corporate leadership will help us pass this bill. And I hope the pain that H.P. is going through today helps that message get delivered.

Thank you.

DUNN: Thank you.

WHITFIELD: The gentlelady from Tennessee is recognized for two minutes.

BLACKBURN: Thank you, Mr. Chairman.

And thank you to all of you for your patience today.

Ms. Dunn, to you first, please, ma'am. The document that you submitted to us with your testimony and the duties of the independent chair; it's under Tab 3.

I want to go, if we can, to that document for a couple of questions for clarification for the record.

First of all, you have said that your duties as the chairman, and you've defined how unusual those duties were. But for the record, you were compensated for those duties and then compensated -- you were compensated for your board membership and then compensated for your duties. And most of that you took in H.P. stock. Correct?

DUNN: That is correct. If you'd like, I can give you some details on that.

BLACKBURN: Yes. I would.

DUNN: I began as a director at Hewlett Packard in 1998. I was required by the company I worked for to remit, I think, 25 percent of my director's fees in cash, so I took 75 percent in stock and 25 percent in cash.

By 2002, I was able to take 100 percent of my director's fees in stock. I have received small cash stipends for chairing committee meetings along the way, I would say in eight years probably a total of $50,000 or less as a committee chairman and committee fees which are extra.

In September, I believe, of 2006, after I had resisted for six months, the compensation committee of H.P. basically forced me to accept an additional $100,000 of compensation, which I take in stock, for my duties as chairman.

The reason I turned it down was because I thought this was a responsibility that ought to rotate among the directors and that ought to be done on the basis of the needs of the company.

BLACKBURN: OK. I want to go down on this, the duties of the independent chair. And the fourth cell in this chart is flow of information to the board. And in this, you state that you oversee the flow of information, including the quality, quantity and timeliness from management to the board.

And I will have to tell you, when you read the Kona report that is under Tab 29 that we have, and I think several of us are going back to Page 10 in that report, it does lead me to ask: Did you make decisions of holding back information about the pretexting? Or did you decide to leave things off the agenda? Were there portions of the report that you chose to share and portions that you did not?

Would you like to clarify that?

DUNN: Thank you for giving me a chance to do that.

One of the pieces of advice that I received earliest in this process from the investigative team was that if those who are being investigated, including myself, know all of the details about how they are being investigated, you no longer have a valid investigation.

DUNN: My approach to balancing my responsibilities to inform the board, and not compromise the investigation, was to report to the board at every regular meeting, between the time that the first investigation began and ended ...

BLACKBURN: That an investigation was underway? So, you basically distilled the information and then brought forward what you felt was appropriate?

DUNN: Especially that they had to know I had responded to their request and I was taking steps.

BLACKBURN: OK. The last cell in your duties of the independent chair, the CEO evaluation: Was the Kona project included in Mr. Hurd's evaluation?

DUNN: It was not.

BLACKBURN: OK. So, it was never referenced.

DUNN: Never.

BLACKBURN: In the evaluation. (inaudible) for his predecessor?

DUNN: Never.

BLACKBURN: So it was never mentioned. It was totally off the record, off the book.

DUNN: Well, let me say that with respect to (inaudible) reviews, I don't know that they were ever written. If they were, I was never privy to them, but I have no reason to think that anything related to investigating board leaks was ever a part of the review process.

And the same is true for Mr. Hurd. And as important as this matter is to us now, I will tell you that this never rose to the level of significance to focus on as a matter of performance by our board the last time he received a review. I suspect it will the next time.

BLACKBURN: OK. You had mentioned and testified earlier in response to Chairman Barton's question, that it was your intention that the investigation be carried out ethically or legally. And in the Kona report on Page 10, you -- in talking about this, the report that was given to you -- "contact established covertly with (inaudible) e-mail account" -- a dialogue has been established.

Further planning of this operation is in progress. Does that sound like it is ethical? Do you believe that to be an action item that would be ethical?

DUNN: That rang a bell with me, which is why, just as in every other case, I did not see myself as the right person to approve methods. I am not in charge of investigations at Hewlett-Packard. I referred the matter to management.

BLACKBURN: Mr. Sonsini?

SONSINI: Yes, ma'am?

BLACKBURN: When was the first time that you heard anything about this investigation?

SONSINI: The first time I heard about the Kona I and Kona II investigations I believe was a note I received from Patty Dunn on or about March 15th of this year.

BLACKBURN: So it would have been prior to the June 19th e-mails that are in here?

SONSINI: Yes.

BLACKBURN: OK. All rightie.

And your e-mail, which is tab 91, OK, a couple of questions about this.

Point number 5 in this e-mail, where you're talking about the investigating team did obtain information regarding cell phone calls that were made.

You say in here on that point: "The legal team also checked with outside counsel as to the legality of this methodology."

Other than you, sir, who was that outside counsel?

SONSINI: Well, I subsequently learned that the outside counsel referred to was counsel made by John Kiernan (ph). I believe that he was counsel specifically to the lead investigator, Mr. DeLia.

BLACKBURN: So that was a separate outside counsel, it was not you. And you have represented yourself as being outside counsel to the board.

SONSINI: I am one of many outside counsels that Hewlett-Packard uses, yes. But this is not -- this reference is clearly not to Wilson Sonsini.

BLACKBURN: OK. And then, point number 6 -- point number 4 and point number 6 in that e-mail, where you have the investigating team did not attempt to obtain the phone records of non-employeedirectors, and point number 6, there was no secret spying; example, no electronic gear.

Do you now agree that those were false assumptions?

SONSINI: I think our subsequent investigation clearly is at odds with these conclusions at that time, yes.

BLACKBURN: OK.

SONSINI: And these conclusions at the time, as my e-mail points out, are based upon two separate reports I received from the H.P. legal department in response to my questions, What was going on?

BLACKBURN: Did you know that those were false before the 8/21 memo, the number 115 went out, that is item number 115 in our book? Did you know that those were false at that time?

SONSINI: Well, this all came to light during my investigation, which took place between August 9 and I believe in August 23. So that is the period of time that this came to light to us. That's when we conducted an independent investigation as to the methods employed and when we began to learn and I began to learn exactly what the methodology was.

BLACKBURN: OK. You know, it's so interesting to me to listen to your testimony and how you came to the awareness of what pretexting was. Had you ever heard of it before this took place?

SONSINI: No, ma'am, I did not. Not at all. I wasn't familiar, quite frankly, with sub rosa investigations. In 40 years of practicing law, I've never been involved in one.

BLACKBURN: Well, I find it so interesting, because in your e- mail, you seem to chastise Mr. Perkins for questioning, while at the same time you seem to give a confidence that there's no legal issue that would surround this; that the company's board chairman really didn't understand or know the details of the program either, but that everything seemed to be legal, even though you give yourself some covering saying that you weren't involved in the formulation of the plan.

So as we're trying to work through this pretexting issue, you know, you seemed to contradict yourself several times within the e- mail as toward your level of understanding of what this is, and maybe even your doubts.

And I think that one of the reasons that we are here...

SONSINI: Well, with all due respect...

BLACKBURN: ... because we had known this was a problem.

SONSINI: With all due respect, first of all, I...

WHITFIELD: The gentlelady's time has expired, but I would like for you to answer the question, Mr. Sonsini.

SONSINI: With all due respect, I am not chastising Mr. Perkins. Quite the contrary. I am being as forthright as I can be to lay out to him everything that's going on. I am the first person to surface to him and to anyone that pretexting was taking place, based upon the information I got from H.P. That's first.

Secondly, at this point in time, I had conducted no inquiry. I wasn't asked to conduct any inquiry. I had no knowledge of the methodologies used. I was relying upon the H.P. legal department. And I required not just a telephone call, I required two separate reports confirming what they did so I could pass it on.

I was, as my e-mail points out, being transparent with Mr. Perkins in response to his questions. There's no inconsistency whatsoever in my conduct at this time.

If we look at the investigation that I did do, which has been referred to and turned over to the staff, you'll see it was then that we were quite clear as our views on the situation.

WHITFIELD: At this time, I'll recognize the gentlelady from Wisconsin for 10 minutes.

BALDWIN: Thank you, Mr. Chairman.

Ms. Dunn, I wanted to ask this question to Ms. Baskins but, earlier today, she pled the Fifth. And so I'm going to ask you.

There was a press conference last week conducted by Mr. Hurd and then an attorney from the law firm of Morgan Lewis.

At that press conference, there was an indication that a draft of the Kona II investigation was prepared in early 2006.

BALDWIN: Is that correct?

DUNN: I think the first, or, sorry, the first report, which was titled, "Final Draft," was dated either March 14 or March 12, 2006.

BALDWIN: OK. Could you turn to Tab 72 of the document book?

And this appears to be something labeled, "Draft, not Final Draft." And it's dated March 10, directed to Patti Dunn, Mark Hurd and Ann Baskins.

Is that the document that you're...

DUNN: Yes, I stand corrected on the date.

BALDWIN: And do you believe you probably received it around March 10 or on March 10?

DUNN: Yes, I do.

BALDWIN: OK. Ms. Dunn, can you tell me whether you met with Mr. Hurd to discuss this draft report at this stage of the investigation?

DUNN: Yes. After this report was issued -- I'm sorry I'm not remembering the date, but it is in my written testimony -- there was a meeting between myself, Ms. Baskins, the investigative team. It took place in Los Angeles. It was around March 15 or 16.

BALDWIN: Can you show the committee the nature of that discussion?

DUNN: Once again, it focused on the results.

BALDWIN: OK.

DUNN: We were upset about this matter. We were upset that we were going to have to ask a longstanding board member to come forward and acknowledge, after having allowed this investigation to go on, with his knowledge, for a year...

BALDWIN: OK. Mrs. Dunn, at the time this draft was presented to you and to Mr. Hurd and Ms. Haskins, who specifically was doing the legal analysis to ensure that the investigative methods detailed in this report were legal?

Whose job was that?

DUNN: From my perspective, I was relying on Ann Baskins. I believe she was relying on Mr. Hunsaker.

BALDWIN: OK. According to this same Morgan Lewis (ph) pronouncement last Friday, in April of 2006, this report was also provided to an outside corporate counsel.

Is that correct?

DUNN: It was provided to Mr. Sonsini, as well as to the chairman of H.P.'s audit committee.

BALDWIN: OK. And can you tell me who -- and what was the role that they were to play, having been provided this report?

DUNN: We, the group I'll name, Mr. Sonsini, Mr. Ryan, myself, Mr. Hurd and Ms. Baskins met at H.P. some time in late April, I believe, to discuss the way forward, given the results of this report.

BALDWIN: Mr. Sonsini, when you received this -- you should look at the document book, also. Do you recognize that document and recall having received it?

SONSINI: I do.

BALDWIN: When you reviewed that, what did you think when you saw on Page 3 a bullet point at the bottom of that page, "obtained, reviewed and analyzed H.P. and third-party phone records to identify calls made to or from reporters or other individuals of interest during the relevant timeframe"?

And, then, on Page 4, "obtained, reviewed and analyzed" -- I'm sorry -- "engineered and executed a covert intelligence-gathering operation pursuant to which an undercover investigator established e- mail contact with Dawn Kawamoto, the CNET reporter, using an untraceable Hotmail account. The operation included placing a legally permissible software-based tracing device in an e-mail attachment sent to Kawamoto."

SONSINI: Yes, when I got the report -- I got the report, as Patty Dunn has indicated, with a view of what do we do with the result that we now have discovered the person who leaked the information? What do we do with the result in terms of a corporate governance point of view going forward?

And I did not focus, other than on the words and the footnote saying that it was lawfully done on (inaudible) investigation.

It certainly seemed to me to be somewhat over the top. But my focus at the time -- because I'm not an expert in such matters, and they would not send this report to me to comment upon those kinds of issues -- my focus was, I was dealing now with a serious corporate governance issue. "I got a problem."

DUNN: I, of course, am focusing on what you didn't focus on. So I guess I want to explore that a little bit further because this document was now available to you and to a number of others.

BALDWIN: Who was in charge of making sure that this -- the tactics used were legal? And once this was disclosed back in March, who pursued questioning the legality of the technique?

SONSINI: Well, I think the record has become quite clear that who was in charge was the H.B. internal legal department. They took the responsibility on. Rightly or wrongly, that's what happened. I came in after the fact and learned that. So that's who was in charge.

BALDWIN: Ms. Dunn, on May 24th, 2006, Mr. Kevin Hunsaker produced a final report of the Kona investigation. Isn't that correct?

DUNN: Yes, there was nothing, to the best of my knowledge, that went on from an investigation standpoint from the March 10th to the final report. I believe the only thing that was left to finalize it were the results of Mr. Ryan -- the chairman of the audit committee's interview with Mr. Keyworth.

BALDWIN: And if you could turn to Document 89, I just would like to make sure that we're referring to the same document.

DUNN: Yes, we are.

BALDWIN: OK. So that is the final report.

On Page 4 of that document, we see, obviously, the final language here, but -- it indicates that H.P. obtained, reviewed and analyzed H.P. phone records and third-party phone information to identify calls made to or from reporters or other individuals of interest during the relevant timeframes.

Ms. Dunn, when was the earliest that you knew that H.P. employees, either directly or through outside investigators, were obtaining third-party phone records?

DUNN: As I have testified and in my written testimony as well, I became aware that phone records were a part of this investigation circa June 2005.

BALDWIN: When you read this bullet point in the final report, were you troubled by that?

DUNN: I need to find the exact bullet point, but I was certainly not surprised that phone records were involved. I had known that for nine months.

BALDWIN: On that same report, page 4, third bullet point down, again I'll read it for the record: "Engineered and executed a covert intelligence-gathering operation pursuant to which an undercover investigator established e-mail contact with Kawamoto, the CNET reporter, using an untraceable Hotmail account. The operation included placing a legally permissible software-based tracing device in an e-mail attachment sent to Kawamoto."

Were you troubled by this bullet point in the report?

DUNN: Remember, the first time I became aware of that technique was back in February. And that's when I referred it on. I did not see myself, at any point, as having a role in approving methods. I wanted the H.P. standard ways of doing these investigations to be used to investigate a standard-of-business conduct violation at the board level.

The board signs up to the same standards of business conduct as every other employee. And my view was: What H.P. does normally to investigate these matters is the appropriate thing to use in this matter concerning our board.

That judgment may be seriously questionable in retrospect, but it was my judgment at the time.

BALDWIN: One closing question. How did you come by the name Kona I and Kona II?

DUNN: The first time I spoke with Mr. DeLia, which I believe was sometime in possibly April of 2005, I was on vacation in Kona. The name "Kona" will never mean the same thing to me again, but he said, you know, "When we do this work, we always assign a project name to it. Do you have any preferences?"

And I looked down at the piece of paper in front of me, and it had something about Kona, and I said, "Kona."

WHITFIELD: The chair recognizes Mr. Burgess for 10 minutes.

BURGESS: Thank you, Mr. Chairman. Thank you all for being here and your forbearance.

BURGESS: We do appreciate you providing answers to our questions.

Mr. Adler, I don't want you to feel left out, so let's talk for a minute.

Can I ask you, do you have the big book there in front of you?

ADLER: No, I do not.

BURGESS: Can I ask you to get a copy of the big book and turn to Tab 20?

ADLER: Did you say Page 20, sir?

BURGESS: Tab 20 in the great book there in front of you. Not printed on the Heidelberg press.

ADLER: Was it 10...

BURGESS: Twenty, 20, 2-0.

ADLER: Thank you.

BURGESS: And in this e-mail, when Mr. Hunsaker asks whether there is any way to lawfully get text message content or is it the same as cell phone records, did that suggest to you that he believed accessing cell phone records was illegal?

ADLER: Sir, could you please restate your question? I want to make sure I perfectly understand you.

BURGESS: Well, you say here -- Mr. Hunsaker says in the message -- or the message to Mr. Hunsaker says: Even if we could legally obtain the records, did you have a reason to suspect that the obtaining of the records would be other than legal?

ADLER: I'm sorry, I'm not trying to be smart about this. I do have a slight hearing deficit, and I am having difficulty.

BURGESS: OK. Let me speak slowly, in simple declarative sentences.

ADLER: Thank you, sir.

BURGESS: When Mr. Hunsaker asked whether, quote, "Is there any way to lawfully get text message content or is it the same as cell phone records," close quote, did that suggest to you that he believed accessing cell phone records was in itself illegal?

ADLER: I don't fully understand the question.

(CROSSTALK)

BURGESS: OK. We're not going to get an answer.

Let's go to Tab 40, if you don't mind. Can I get you to turn to Tab 40 in your book?

ADLER: Thank you.

BURGESS: Right in the middle of the page, under -- there's a heavy line there, and it says, "From Adler, Frederick P.," which I assume is you, just below the middle of the page it says, "Agreed. I am very concerned about the legality of this information."

ADLER: Yes, sir, I see it.

BURGESS: Can you tell us what you were concerned about?

ADLER: This message occurred between myself and my co- investigator, Vincent Nye. This message went back and forth between us after a meeting on February 7th between the investigative -- the undisclosed leak investigation team, consisting of myself, Mr. Nye, Mr. Hunsaker, Mr. Gentilucci and Mr. DeLia.

ADLER: It was at that meeting that we had, that both myself and Mr. Nye had started questioning Mr. Gentilucci and Mr. DeLia and Mr. Hunsaker about the pretext calling and how the information was being obtained and whether it was in compliance with the law.

BURGESS: What did you do to assure yourself that it indeed was in compliance with the law?

ADLER: This issue had already been broached the previous day with a statement by I believe it was Mr. DeLia that they had obtained call information from -- personal call information belonging to Mr. Keyworth. That was the first time that I had been aware of any such activity.

BURGESS: Mr. Adler, I'm going to interrupt you in the interest of time, but I do have a follow up question that I'm going to submit in written form and ask if you would, if you wouldn't mind providing us an answer.

But I'm going to ask you a series of questions, and it should go fairly quickly.

At any point during the Kona II investigation, did anyone say what we are doing is just crazy?

ADLER: Essentially, myself and Mr. Nye did. Mr. Nye went to Mr. Gentilucci, as we've already seen testimony of here today, and evidence of. I went to my manager late on the 6th or early on the morning of the 7th of February 2006 and told him I was deeply troubled and concerned about what had happened.

Shortly thereafter, Mr. Nye also contacted my manager after not receiving satisfaction through his manager, Mr. Gentilucci. My manager, Timothy O'Neill (ph), a former law enforcement officer, also became very concerned with what was occurring. And he said that he would go forward with our concerns.

He made contact with Mr. Gentilucci and with counsel, which was Mr. Hunsaker, and expressed his concerns.

BURGESS: What was Ms. Dunn's level of involvement in the Kona II investigations, to the best of your recollection?

ADLER: The suspense level?

BURGESS: No, her level of involvement in the Kona II investigation.

ADLER: The level of whose involvement?

BURGESS: Patricia Dunn.

ADLER: Oh. I have only hearsay to offer, through Mr. Hunsaker's statements and when she was being reported to during the course of the investigation as to our progress.

And at the end of the investigation, she was given a report as to our findings.

BURGESS: Did you attend any of the meetings with Ms. Dunn about the investigation?

ADLER: No, I did not.

BURGESS: During the course of the investigation, was Ms. Dunn aware that pretexting was being utilized to access personal telephone records?

ADLER: I have no knowledge of that.

BURGESS: Would that be included in that report that you just referenced?

ADLER: The pretexting?

BURGESS: Yes.

ADLER: It could be.

BURGESS: Do we have a copy of that report?

ADLER: I believe -- well, I don't know. It was in my e-mail and I know that the committee has received quite a bit of it, so I don't know.

BURGESS: Well, did Ms. Dunn have to approve certain aspects of the investigation before you could proceed?

ADLER: I don't know. That was between Mr. Hunsaker, Ann Baskins and Ms. Dunn. I have no knowledge of...

BURGESS: Yes, two of those individuals took the Fifth Amendment. So I didn't have a chance to question them. That's why I'm asking you to help with that.

ADLER: I understand.

BURGESS: Who came up with the idea of the embedded tracking device?

ADLER: That was my idea.

BURGESS: And we've heard this referred to previously as a legally permissible...

ADLER: Yes, at the time I understood it to be a legally permissible way to obtain information. And I still believe it to be as such.

It was and it still is sanctioned by my management as an investigative tool. We have used it in the past for investigations, for determining locations of stolen product and what-not.

We have also assisted law enforcement. We recently...

BURGESS: Yes, but...

(CROSSTALK)

BURGESS: Who has to approve the use of that?

Who has to approve the use of that tracking device?

BURGESS: I mean, it's almost like putting a wiretap on your phone, Mr. Adler.

ADLER: I beg your pardon, sir?

BURGESS: I said, to me, to just the lay consumer, that's akin to someone putting a wiretap on my phone.

ADLER: A wiretap is normally considered a real-time interception. This was not a real-time interception. There's also the interception of personal data.

We did not intercept any personal data.

BURGESS: Mr. Adler, I would submit it's equivalent to going through the mail in my mailbox.

ADLER: I didn't go through your mail.

BURGESS: Well, let me just ask you this: Can you turn to Tab 50 for a moment?

ADLER: Yes, sir.

BURGESS: Just so there will be no question in anyone's mind, what we've got in front of us looks to be a how-to kit on how to put this tracking device in a zip file and attach it to an e-mail. Is that correct?

ADLER: That is correct.

BURGESS: And these are instructions that were sent by you to Mr. Hunsaker and Mr. Gentilucci and Mr. Nye and other people who took the Fifth Amendment earlier?

ADLER: Correct.

BURGESS: Now did Patricia Dunn know that this recipe was being forwarded and utilized?

ADLER: I have no idea.

BURGESS: Ms. Dunn, do you have Tab 50 in front of you? Do you have Mr. Adler's e-mail?

DUNN: No, I was not copied on this e-mail and I'm seeing it for the first time here.

BURGESS: So this was not something you had been aware of before today?

DUNN: No, sir.

BURGESS: Does this strike you as a permissible tactic to use, attaching a tracking device onto an e-mail? I mean, it gives me the creeps to think someone would do that. Does it bother you?

DUNN: It is kind of surprising that it's legal, isn't it?

BURGESS: Ms. Dunn, Hewlett-Packard has acknowledged that the personal telephone records of several directors and employees were accessed during the Kona investigations. I would like to read to you a written testimony provided by Scott Taylor, the chief privacy officer for Hewlett-Packard, during a hearing of this committee's Subcommittee on Commerce, Trade and Consumer Protection. This occurred back in June.

And I quote: "As a company, Hewlett-Packard is 100 percent committed to excellence in consumer and employee privacy for two fundamental reasons. First, because it is the right thing to do, we have an obligation to fulfill the trust that Hewlett-Packard employees have given us in handling their information."

I would ask you: Would you agree that accessing personal phone records of your employees and directors is a major breach of trust?

DUNN: It should never have happened. I'd like to add that 99.999 percent of Hewlett-Packard employees live up to the statement you just read every day.

BURGESS: I thank you -- Mr. Chairman, if I just make one observation. It's a day, I guess, that the stock market is going to crest a historic high that it hasn't seen since the year 2000. And we all recall it was in part the lack of corporate self-governance that brought the stock market low after its all-time high of 11,700 whenever it was, back in March of 2000.

We have recovered from that corporate problem. We have recovered from 9/11. We have recovered from the dot-com bubble. Please don't take us down that path again.

WHITFIELD: Gentleman's time has expired.

DEGETTE: Mr. Chairman, I'd ask unanimous consent for one minute to follow up on Mr. Burgess's question, to ask Mr. Adler a question.

WHITFIELD: Do you object?

(CROSSTALK)

DEGETTE: Thanks, Cliff. Thanks a lot, Cliff. Appreciate it.

WHITFIELD: All right. And, Ms. Eshoo, I said I was going to go to you next, but it's our procedure to allow the members of the oversight committee to finish first. So at this time I recognize Mr. Stearns for 10 minutes.

STEARNS: Mr. Chairman, I'm going to give unanimous consent to the gentlelady there to ask her question.

WHITFIELD: Ms. DeGette's recognized for one minute.

DEGETTE: Mr. Adler, I heard you testify in response to Mr. Burgess that this embedded technology is a technique used quite frequently. Is that correct?

ADLER: I believe it to be so.

DEGETTE: Have you used -- how long have you worked at Hewlett...

ADLER: It's available through a commercial site called ReadNotify.com.

DEGETTE: How long have you worked at Hewlett-Packard, Mr. Adler?

ADLER: I am a little bit over three years now.

DEGETTE: And how often have you used this technique of embedded technology to trace e-mails during your employment at Hewlett-Packard?

ADLER: Personally...

DEGETTE: Personally or that you know of.

ADLER: I would have to venture a guess at maybe a dozen, two dozen times.

DEGETTE: And in what circumstances?

ADLER: In investigating corporate issues such as theft. As I said, also we used -- assisted law enforcement just recently in locating an at-risk child with the technology. It is...

DEGETTE: Have you used it to investigate internal leaks before this particular situation?

ADLER: No, we have not. Not to my knowledge.

DEGETTE: Thank you.

WHITFIELD: Mr. Stearns?

STEARNS: Thank you, Mr. Chairman.

Mr. Sonsini, let me just ask this question. In your written testimony you say that the use of pretexting and similar intrusive investigative methods in these circumstances is wrong.

STEARNS: Is that correct?

SONSINI: Yes.

STEARNS: In Exhibit 91, however, you conclude that, quote, "that the process was well done and within legal limits," end quote.

I guess the question is what has changed between then and now. Do you want to see that Exhibit 91?

SONSINI: No, I'm familiar with it, Congressman.

At the time of that communication, I think you're referring to my June e-mail to Mr. Perkins, I was relying upon the H.P. legal department in responding to me when I asked how should we respond to Mr. Perkins concerns? Tell me what you've done.

I received a written report from Mr. Hunsaker who oversaw the investigation. I received a written report from Ann Baskins, the general counsel. I spoke to Ms. Baskins, and I asked for repeated assurances, do you believe that this was all done properly?

I then took that information, without any independent investigation, and sent the e-mail to Mr. Perkins. And it says it appears -- it appears.

STEARNS: So can I safely say that at that point you felt you were within your legal limits to do this?

SONSINI: Yes. I was asked to do this by Ann Baskins. I was asked to respond to Mr. Perkins.

STEARNS: Knowing what you know today and what you did in your testimony, you stand by the position now that it's wrong. Right?

SONSINI: Absolutely. After we did conduct an investigation and I had the opportunity to look into the matter and had the opportunity to research the law and do our investigation, we concluded quite the contrary.

STEARNS: At the time of these investigations, were you aware that several states, including Florida, California and Georgia, were considering legislation that would specifically ban pretexting for telephone records?

SONSINI: I subsequently learned that. When we did our investigation in August we looked at those statutes. We saw that the law was rapidly changing in the country regarding pretexting. That's correct.

STEARNS: Perhaps you heard my opening statement. I mentioned a California statute that said it was wrong to do this, and that was in play when you were previously involved.

STEARNS: In fact, when you said that you thought it was legally acceptable, did you know about that statute back then?

SONSINI: No, I didn't, sir. As I indicated, I didn't know about the methodologies going on then, and I'm no expert. I didn't even know the law on pretexting at that point and time.

It wasn't until we did our investigation in August that I became cognizant of it.

STEARNS: Now, Ms. Dunn, knowing what you know today, is your position that pretexting is wrong today?

DUNN: Yes, sir. It is.

STEARNS: So, you're categorically saying it's wrong.

DUNN: It's fraud. It's the fraudulent misrepresentation of identity. It's wrong.

STEARNS: Right. And knowing what you do today, you would not have let these investigators do this?

DUNN: I would have gone through the management chain. I did not supervise the investigators, but I would have either brought it to the attention of the chairman of the audit committee or to the CEO, if I thought fraud was involved.

STEARNS: I would think that since you authorized it, they would report to you regularly. Didn't they do that with progress reports?

DUNN: They did provide me progress reports, but I was not the supervisor of this investigation. I had no role in management. Other people were involved in managing the investigation, choosing...

STEARNS: But you got progress reports, didn't you?

DUNN: I got updates. And I was focused on the results.

STEARNS: Were briefings given to you?

DUNN: I think there were three meetings over the course of...

STEARNS: OK, so you had three briefings by...

DUNN: Over the course of 13 months.

STEARNS: OK. And the three briefings, did they ever tell you how they got the information?

DUNN: I was told in, I think it was April or May, I testified earlier, April 2005, that phone records were involved, and I was informed of that by Mr. DeLia.

STEARNS: I think, honestly, if you were notified that they were even doing pretexting, I'm not sure you or many people would even know that that was wrong at that point -- because, when pretexting came up on our committee, a lot of us didn't know what it was. And when we heard it and we had a chance to think about it, we understood it was wrong. But, I mean, it's such a serious way that investigators do this, that it has probably widespread.

DUNN: If I may offer, I think the word pretexting is a pretext.

STEARNS: Yes.

DUNN: It is meant to confuse.

STEARNS: Yes. I understand that.

Ms. Dunn, your written testimony is 33 pages long. You go into great detail explaining why the investigation was necessary and how you were assured that these aggressive tactics were legal.

You even advocate congressional action to produce clear-cut rules on pretexting, a suggestion that this committee has endorsed.

However, conspicuous by its absence in your testimony, is any degree of contrition or acceptance of responsibility. And I've listened to this testimony in my office and you've just indicated it's wrong. You indicated you'd been briefed three times. And yet, there's no suggestion that you're going to accept any responsibility? And no sense that what you did was wrong.

STEARNS: So I get the sense, after reading your testimony, that you still do not really believe that you did anything wrong here.

And I guess that's the question: Do you feel that you're totally innocent here and with no culpability?

DUNN: My understanding is that my opening statement is a part of my full submission. And I would like to repeat...

(CROSSTALK)

May I answer your question?

STEARNS: Well, I'm asking the questions.

The question I want is, yes or no: Do you think that you have any culpability in this whole fiasco -- just yes or no?

DUNN: I'll repeat what I said in my opening statement. I deeply regret that so many people...

STEARNS: No, that's understandable. We're not talking about other people. We're talking about you personally.

DUNN: Including me -- that was in my opening statement. And I'd like to tell you what I would do differently.

STEARNS: But regret is one thing but culpability, that you accept blame, is another. And I'm just trying to think -- and I know, I mean, you could say you're not blamable. I mean, you can say that. But I'm just trying to put on record whether you think you're at fault for anything other than regrets and you're sorry and things like that.

I mean, is it just possible you could say, yes or no, that you feel you have some culpability?

DUNN: If I knew then what I knew now, I would have done things very differently. And there are some specific things I would have done very differently.

STEARNS: OK, I'm interpreting that...

DUNN: It is a foundation component of corporate governance that directors must rely on the reasonable representations of management. And those I did have.

STEARNS: But I'm interpreting what you say as that, knowing what you know today, it was wrong?

DUNN: Absolutely.

STEARNS: And, knowing what you do today, that you have to accept responsibility. You have to accept personal responsibility for what happened. That's my interpretation of what you're telling me. Is that a correct interpretation?

DUNN: I do not accept personal responsibility for what happened. I am very sorry for what happened.

STEARNS: OK. Mr. Chairman, I think she's basically saying she's not culpable here and she accepts no responsibility for what occurred.

Now, under the circumstances, considering how you feel, wouldn't at this point it occur to you that you might want to resign because of all these problems?

DUNN: I have done so, sir.

STEARNS: OK. All right.

DUNN: I'd do so again, if you like.

(LAUGHTER)

STEARNS: Listen, I guess in your opinion now, you can tell me why you resigned.

DUNN: I resigned because the board of Hewlett-Packard asked me to resign a week ago Friday. Last Friday.

STEARNS: And why do you think they asked you to resign?

DUNN: Because they had voted twice in the prior two weeks. I'm not sure if it was a vote, but I heard that they unanimously supported me to remain as chairman and director until about 10 days ago, by which time the press reaction to all of this had become so intense that we agreed I should step down as chairman in January.

But I was asked to remain as a director by many directors.

The press reaction became more and more and more intense. And I think that, finally, the board decided I was a major distraction to the company getting over this problem.

They asked me to resign, and I accepted their decision.

STEARNS: Let me ask one more question. Let me just say that somehow, in my personal opinion, that I have great empathy for you. Because I've been in these oversight committees enough to know that very competent, innocent people get caught up in things they don't understand.

But let me, Mr. Chairman, if I can, get my one last question in here.

Ms. Dunn, your written testimony says repeatedly that you received assurance that the tactics used in the investigation were both common and legal. But I'd like you to turn to Exhibit 39.

In this e-mail, one of the investigators Vince Nye expressed serious reservations about what is being done to gather phone records. He says, quote, "It is very unethical at the least and probably illegal. If it is not totally illegal, then it is leaving Hewlett- Packard in a position that could damage our reputation or worse," end quote.

So my question is, even if you had been told that these tactics were legal, why was Mr. Nye apparently the only one to consider the negative publicity that might be generated and how that might harm the company? Wasn't your job there to act and do something, based upon that Exhibit 39?

DUNN: The first time I heard that any member of this investigative team had concerns about its legality was from my lawyer this morning, who read it in The Washington Post, and maybe less than a week ago I read a report that Mr. Adler had expressed concerns.

There was never any hint that anyone at Hewlett-Packard had concerns. Quite to the contrary.

STEARNS: Thank you.

WHITFIELD: The gentleman's time has expired.

Since all members of the Oversight Committee have asked questions, I recognize Ms. Eshoo for 10 minutes.

ESHOO: Thank you, Mr. Chairman, very much.

Thank you to the witnesses.

Ms. Dunn, I want you to know that I have a great deal of respect for what you have done with your life.

DUNN: Thank you.

ESHOO: You have, I think, been absolutely remarkable from where you began, very humble beginnings, and culminating with the chairmanship of a board of directors of one of the most prestigious companies in the world. I want you to know I respect that.

And again, I have this heaviness about me because I think this is enormously sad.

ESHOO: I just want to make a couple of observations.

There are teams and teams and teams of lawyers around every company, corporation, publicly held entity, and I guess that's the way it needs to be. But I think that when you drill down in this, that there was some lawyer from some shoe box outfit in Massachusetts that people ended up relying upon for legal advice.

And I think that that should send a huge message to the company and to all companies, that as one of my colleagues said, none of these things should be circular. People are relying from one memo to another.

But there's that whole human interaction, or taking time to be thoughtful and say, beside legal: Is this right, is this right? That's why there's so much regret about this, you know.

Someone said to me many, many years ago, "Whatever you do, Anna, always remember, picture it above the fold on the front page of the newspaper; what you say, what you write, what you think and what you act on."

And I think that's a lesson for all of us. There isn't anyone in this hearing room that's perfect. This is a manifestation of how less than perfect human beings are, even those that are in the highest reaches of corporations and law firms and all of that.

So with that -- Mr. Adler, can you hear me?

ADLER: Yes, ma'am.

ESHOO: OK. I'd like to ask you a couple of questions about this whole investigative arm of H.P.

How long has H.P. had a retainer contract with either SOS, ARG or Eye In The Sky?

ADLER: I'm afraid I can't answer the question, because I don't have the information. That was all done through, I believe, Mr. Gentilucci, which is a whole separate entity under H.P.

ESHOO: All right. Well, maybe we can find out from Mr. Hurd.

Do you know if these companies have been on retainer with H.P.? And if so, for how long?

ADLER: I'm sorry. I don't have that information either.

ESHOO: How long have you worked for H.P.?

ADLER: How long...

ESHOO: How long have you worked for H.P.?

ADLER: I'm sorry. I worked for H.P. over three years.

ESHOO: And prior to this explosion, this scandal, had you ever heard, as an employee in your position, had you ever heard of any of these people that were on retainer?

ADLER: Yes. I had previously been on an investigation where it was a group, more or less, for lack of a better word, task force type of thing...

ESHOO: How did you use them?

ADLER: Mr. DeLia -- SOS, aka SOS -- was responsible for providing background information during the course of the investigation.

ESHOO: Are you aware of any pretexting ever going on through contracting with these outfits outside of Kona I and Kona II?

ADLER: No, not until February 6th of this year.

ESHOO: When you say you were concerned, what did you do about your concern?

ADLER: I went to my manager, and...

ESHOO: And he was or she was?

ADLER: He is...

ESHOO: He is?

ADLER: Timothy O'Neill (ph). And Mr. O'Neill (ph) recognized my concerns. Mr. Nye also went to Mr. O'Neill (ph), as I stated earlier, since Mr. Gentilucci wouldn't listen to him.

ESHOO: Was it ever kicked upstairs? This is another circle, see, where people are concerned, but something's not happening with it.

Was it ever kicked upstairs, so to speak?

ADLER: This is a rather unique circumstance...

ESHOO: It sure is.

ADLER: In that it was very confidential. There were a limited amount of people who knew about it.

Mr. Hunsaker was counsel. And so we knew -- we meaning Mr. O'Neill (ph) and myself and Mr. Nye -- that if we had gone directly to Mr. Hurd or Ms. Dunn or Ms. Baskins with our concerns, they would have immediately gone back...

ESHOO: I can tell. Something didn't happen with it.

Let me go to Mr. Sonsini. Good to see you.

SONSINI: Thank you.

ESHOO: Long way from Palo Alto to this hearing room, but, at least the weather's beautiful. It's like Palo Alto here today.

There is a quote that is attributed to you over and over and over again in the press. I think that it was -- I know that it was referred to today. I don't have the big briefing book in front of me with the different sections in it. But essentially, its been attributed to you that pretexting was legal.

Can you speak to that just briefly? I have some follow-up questions I would like to ask you and then I want to...

SONSINI: Yes, the press is absolutely wrong on that. I never took a position that pretexting is legal. Quite frankly, once we investigated the matter and we got into it, we came out with a report on legality.

The press took the e-mail to Mr. Perkins and turned it into a legal opinion of Mr. Sonsini.

That was not it. My e-mail was very clear. Mr. Perkins made an inquiry of me. I promptly went to Ms. Baskins and I said, "Give me the information to respond to him; I want to be open to him. What was going on?"

I just didn't receive a flippant answer. I got a written report from Mr. Hunsaker, I got a written report from Ms. Baskins, I talked to her about it. And I took that information, I conveyed it to Mr. Perkins. And then I said, based upon what they told me, that it appears -- that it appears -- that this was in legal limits.

It was not an opinion. It was conveying the truth of what I was told. At that point of time, I was not asked to give any legal opinion. That came later. At that point and time.

ESHOO: What about the form, 8-K, where there is a reference to it? Can you speak to that?

SONSINI: The form, 8-K, that must be the 8-K filed at the end of August. And that 8-K, I think, refers now to outside counsel's view on legality.

SONSINI: Yes, that came after we conducted the investigation, which began August 9, well after the June exchange.

ESHOO: Let me ask you this. When there is -- and you've been the outside counsel for years...

SONSINI: One of the outside counsel.

ESHOO: Yes. And I think everyone in the hearing room, if they don't know, should know that you represent a good part of the companies in Silicon Valley.

When there is a director, such as the one that -- really, I can't believe that he's not here today; I mean, this is -- Dr. Keyworth.

How do you advise a board when there -- let me ask you this. Did the board ever come to you and say, "Outside pretexting and investigations, there is a problem with this board"? I mean, it really sounds like it's somewhat dysfunctional, to me -- or, you know, people say the parties scrap, the political parties.

Boy, you really had a whopper there.

But at any rate, a member of a board of directors of a publicly held company has a fiduciary responsibility. It's a huge responsibility because very average people's money is placed in investment funds that are invested in premium companies -- firemen, policemen, nurses, teachers.

So this is a very serious thing.

Were you ever made aware that there was someone there who couldn't keep his mouth shut and that it was damaging, that it was not only inappropriate but proprietary information that goes right to the heart of damaging what shareholders hold?

SONSINI: As a matter of fact, I was aware. I was aware back in January of 2005. The board did come to me.

Actually, it was the nominating and governors' committee, along with Carly Fiorina (ph), came to me and said: We believe that we have leaks in the boardroom. What should we do?

I said there are three things we've got to do. One, I should make an inquiry of each director. Two, we should remind them of their confidentiality obligations. And three, we should conduct an evaluation of that board.

SONSINI: They said, "You have the assignment."

So what I did do is I talked to each director. I was unsuccessful in finding the leak. I reminded them of their confidentiality, and then I presented...

ESHOO: Did you talk to Dr. Keyworth?

SONSINI: I certainly did.

ESHOO: And he denied it?

SONSINI: He denied it.

ESHOO: And then I presented a report of my evaluation of the board, a very candid report of what I thought the problem was.

You are correct, Congresswoman, that the leak is a symptom of a greater problem. The way I dealt with it was to deal with it in the board room.

WHITFIELD: The gentlelady's time has expired.

ESHOO: Thank you, Mr. Chairman. Are we going to have another round? Are you going to have another round?

WHITFIELD: We are going to have another round.

The gentleman from Massachusetts is recognized for 10 minutes.

MARKEY: Thank you, Mr. Chairman.

Ms. Dunn, did any of the previous investigations by Mr. DeLia for H.P. involve the use of pretexting in order to obtain telephone records, Social Security numbers or other confidential personal information for the company?

DUNN: I have no knowledge about any previous investigations done by Mr. DeLia. All I knew and know is that he had done this kind of work for the company almost exclusively for eight or nine years.

MARKEY: Do you know, Mr. Adler, if Mr. DeLia had ever used pretexting in other investigations?

ADLER: Congressman Markey, I only can offer hearsay from Mr. Nye that he had complained to his manager, Mr. Gentilucci, on previous occasions about the practice.

MARKEY: Mr. Sonsini, do you know if Mr. DeLia had used pretexting in other investigations?

SONSINI: I don't know. I think our investigation, when we interrogated him, there may have been an answer to that. I don't recall.

MARKEY: OK.

Ms. Dunn, did any of the previous investigations by Mr. DeLia or any other person at H.P. or employed by H.P. involve spying on corporate competitors to H.P.?

In other words, if H.P. was willing to spy on yourselves, did H.P. engage in corporate espionage of other companies?

DUNN: Congressman Markey, the only investigation that H.P. has ever done with which I have any familiarity are the ones known as Kona I and Kona II.

MARKEY: Mr. Adler, do you know if there was corporate spying on other corporations?

ADLER: I have no such knowledge.

MARKEY: Mr. Sonsini, do you know?

SONSINI: No, sir, I don't.

MARKEY: OK.

Ms. Dunn, in a January 30th, 2006 e-mail to Kevin Hunsaker, Mr. Gentilucci, H.P.'s global security manager, states, quote, "We use pretext interviews on a number of investigations to extract information and/or make covert purchases of stolen property" -- in a sense, all undercover operations.

What do you know about this use of pretext interviews by H.P. employees, which Mr. Gentilucci was referring to?

DUNN: I know nothing about H.P.'s investigations outside of Kona I and Kona II. But I have testified that the methods used in those two investigations were standard at H.P.

MARKEY: OK.

Ms. Dunn, an amended 8-K was filed last night with the Securities and Exchange Commission. Would you please comment on the accuracy of that filing?

DUNN: Congressman Markey, I have asked my attorney, Mr. (inaudible), to communicate directly with Morgan Lewis -- a copy of which letter was sent this morning.

There are inaccuracies in the 8-K. I have to point out that I was certainly no longer a part of the company when that was filed. But it was based on information that could have been obtained while I was a part of the directors of H.P. And I'm afraid that, because no one ever asked me and they certainly haven't looked at my sworn testimony, that filing was made with a couple of mistakes.

MARKEY: OK. An 8-K filing was made by H.P. today, which reports that H.P.'s board has, quote, "Reviewed and approved certain benefits to Ms Baskins, H.P.'s general counsel," who resigned from H.P. last night and took the Fifth Amendment here today and refused to testify.

Do you think that, giving a more than $3.6 million golden parachute is an appropriate action by H.P. at this time?

DUNN: Congressman, I'd like to point out that I am no longer on the board of H.P. I did not participate in the deliberations.

MARKEY: Do you think it's appropriate for her to receive a $3.6 million golden parachute last night?

DUNN: The way these decisions are made are based upon deliberation. I would want to hear the other views of the directors if it were me still sitting on that board.

She was a 26-year employee of Hewlett-Packard. She bled H.P. blue ink. This woman, I'm sorry to say, her career is ruined. She made some errors in judgment. I relied upon her, as did many others. I'm not going to comment right now what the appropriate compensation for her is to leave H.P.

MARKEY: The results of H.P.'s leaked investigation were presented to H.P.'s board at its May 18th, 2006 meeting, is that correct?

DUNN: May 18th?

MARKEY: May 18th.

DUNN: Yes.

MARKEY: You participated in the board's discussions of the results of the investigation. During that discussion, did anyone raise any concern about how this investigation had been conducted?

DUNN: No one did.

MARKEY: During the meeting, a majority of the board asked Mr. Keyworth to resign, which he declined to do. Is that right?

DUNN: That's correct.

MARKEY: During that same board meeting, Mr. Perkins announced his resignation, is that correct?

DUNN: That is correct.

MARKEY: Did Mr. Perkins indicate the reason for his resignation?

DUNN: He did.

MARKEY: Did he indicate that it was related to the leak investigation?

DUNN: No. He related that it was due to what he perceived to be a betrayal by me; that we had an agreement to cover up the identity of the leaker from the board, which I broke.

DUNN: And I explained to him that we never had such an agreement. But that was the reason for his resignation.

MARKEY: So he did not raise at that time any concerns about the methods used in the leak investigation?

DUNN: He did not in the company's filing in its 8-K.

MARKEY: No, in the meeting did he?

DUNN: In the meeting he did not.

MARKEY: He did not?

On May 22nd, did H.P. file a form 8-K with the Securities and Exchange Commission, which is used to report material events or corporate changes?

DUNN: The company did. Yes, sir.

MARKEY: Who was responsible for that filing?

DUNN: That's a statement by management to the SEC, and it's the responsibility of the legal department with the approval of the CEO.

MARKEY: Did you review or approve this filing?

DUNN: No, I did not, nor did any member of the board. We were provided copies of 8Ks in the normal course of events after they were filed.

MARKEY: All right. On May 18th, Thomas Perkins announced -- the 8-K stated on May 18th: Thomas Perkins announced his resignation as a director of H.P. effective immediately. The text of H.P.'s press release relating to Mr. Perkins' resignation is filed with this report as Exhibit 99-1 (ph).

That press release in turn merely states: H.P. announced today that Thomas J. Perkins resigned from its board of directors on May 18th, 2006, with immediate effect. And then goes on to quote Mr. Hurd as thanking Mr. Perkins for his service to the company.

Would you say that this May 22nd, 2006, SEC filing and accompanying press release gave a complete picture of the facts and circumstances surrounding Mr. Perkins' departure?

DUNN: Certainly not with respect to his opinion of me. But Mr. Sonsini has much more insight as to how that filing was made than I.

MARKEY: Mr. Sonsini would?

DUNN: Yes, sir.

MARKEY: So before this filing was made, was there any consideration given to fully disclosing H.P.'s leak investigation, its findings, the board's request to Mr. Keyworth that he resign, his refusal to do so, and Mr. Perkins' subsequent resignation from the board?

DUNN: May I turn to Mr. Sonsini...

MARKEY: Yes, please.

DUNN: ... who's our counsel...

MARKEY: Whoever is the appropriate person to answer the question.

SONSINI: Yes, consideration was given of that, Congressman. We filed the 8-K report at that time. I did receive a copy and did review it.

Based upon the information we had of why Mr. Perkins was resigning, I specifically before that report was filed talked to him, and I articulated almost verbatim the requirement of the 8-K: Was there any disagreement? Do you have any disagreement with the company or the board over any operation, over any policy or any practice?

He said no.

MARKEY: So why did H.P. wait until September 6th, 2006, to issue a new 8-K filing with the SEC describing the facts surrounding Mr. Perkins' resignation. If the board knew in May what his concerns were and if H.P. knew even more by July, why did it take until early September to issue more accurate disclosure?

SONSINI: The 8-K that was filed at the end of August was not filed with respect to the item about director resignation. It was filed to provide other information in the market, and it was provided then because by then we had completed the investigation that the board requested we do about pretexting.

Mr. Perkins' disagreement was not over a company policy, practice or operation. As a matter of fact, I subsequently confirmed that to him in a June e-mail reminding him of that, and he had no objection to it.

MARKEY: Well, the September 6th H.P. filing reports that after the May board meeting and in response to the concerns raised by Mr. Perkins, the board, quote, "engaged the outside counsel to conduct an inquiry into the conduct and processes employed with respect to H.P.'s investigation of leaks and that this outside counsel was not involved in the investigation of the leaks initiated by the chairman or the internal H.P. group."

Isn't it true that all of that information could have been made public much earlier in the 8-K filing?

SONSINI: I don't think so. I mean, it could have been. But it really wasn't material at that point in time, because our investigation wasn't completed.

I am the outside counsel. So it was a judgment on materiality, when to get the information to the market, and that judgment was made.

WHITFIELD: Gentleman's time has expired.

We're going to do a second round here.

WHITFIELD: Ms. Dunn, Mr. Markey raised the issue of the May 18th board meeting at H.P. headquarters in Palo Alto, California, in which you informed the board that George Keyworth was the director that was leaking information.

And it was told in this article here that you laid out the surveillance and pointed out the offending director.

Could you describe to the committee what the survey data was that you laid out at that meeting?

DUNN: Mr. Chairman, I'm not sure what reports you're referring to, but may I assume they're press reports.

WHITFIELD: That's correct.

DUNN: The press reports on this matter have been wrong from the beginning. My sworn testimony, as written and submitted, has the details of what happened, which I will be very happy to review with you quickly.

WHITFIELD: OK.

DUNN: The chairman of the audit committee, Mr. Ryan, based on a meeting -- let me refresh my memory -- took place on April 27th, took away the responsibility for reviewing the report and informing the board of its findings.

At the May 18th meeting, he was the person that outlined a summary of the report's findings to the board.

WHITFIELD: And could you outline a summary of that report for us?

DUNN: There is a set of talking points that I believe have been produced, that Mr. Ryan gave to the board, although he presented them verbally.

WHITFIELD: What was the evidence that was found against Mr. Keyworth?

DUNN: That is contained in Mr. Hunsaker's report. And it is...

WHITFIELD: Could you summarize it for us?

DUNN: There were 10 unauthorized media disclosures that took place over the course of a couple of years, seven of which were attributable to Mr. Keyworth, and to which he later confessed.

The board meeting, if I may continue with its conduct, Mr. Ryan presented without naming the leaker the evidence. Another director had suggested that the identity of the leaker not be disclosed during deliberations, so that the board could have an objective discussion about what the right move, if any, was.

WHITFIELD: And who made the decision to disclose it to the board?

DUNN: Mr. Ryan disclosed the name. I did not disclose the name.

WHITFIELD: So you didn't have any say-so on the disclosure, whatsoever.

DUNN: I had turned the matter over to Mr. Ryan on advice of counsel. There was agreement between myself, Mr. Hurd, Mr. Ryan, Mr. Sonsini and Ms. Baskins that that was the best way to...

WHITFIELD: And what was Mr. Ryan's position?

DUNN: His position was that he -- I'm sorry, he was the chairman and remains chairman of the audit committee of Hewlett-Packard.

WHITFIELD: OK. And from your perspective, did that end the investigation? The May 18th board meeting, was that the end of the investigation?

DUNN: I believe the investigation ended for all intents and purposes in mid-March, except for the interview notes that came from a discussion between Mr. Ryan and Mr. Keyworth on May 17th.

WHITFIELD: And from the surveillance in the investigations, Mr. Keyworth was the only one identified as leaking board information.

DUNN: That is correct.

WHITFIELD: OK. Now, let me just say that I understand perfectly well that the news media does not always get everything correct. And I think all of us have experienced that.

But in this article, it also says -- and I think you maybe made reference to this in your testimony -- that you and Mr. Perkins really did have some personality conflicts.

Would that be accurate? Or were you all the best of friends? Or did you have personality conflicts?

DUNN: Mr. Perkins disagreed with many of the governance moves that I made on the board.

He always told me that he had nothing personal against me, and, in fact, we had a cordial relationship until sometime in early 2006 when it became clear that this report was moving in the direction of identifying his friend and ally, Mr. Keyworth.

WHITFIELD: Well, the reason I was asking because in this news article, which may or may not be true, it quotes you as saying that all of this investigation, all of this grew out of a personal dispute between you and Mr. Perkins.

DUNN: I don't -- I never said that. I've never seen a news story to that effect.

WHITFIELD: OK. So you would disagree with that.

DUNN: I've never seen that news story and it would be just one among many, many, many that are completely misleading.

WHITFIELD: Who was the first board member that came to you and said, "You know what; we need to investigate these leaks"?

DUNN: I have tried -- I'm under oath here. I have tried, believe it or not, throughout this, to maintain some shred of the sanctity of the boardroom. If you force me to say, I will. But I do not think that it is relevant to the public interests that I disclose my confidential discussions with directors.

WHITFIELD: OK. Were there more than one board member that came to you and said...

DUNN: Seven of nine.

WHITFIELD: Seven of the nine said: We need to investigate.

DUNN: Yes, sir.

WHITFIELD: OK. Now, reading from this news report again, which may or may not be true, it says that -- they characterize Mr. Perkins as sort of a person who had a broad view of things, more of a -- looked at things in a broad perspective.

And they talk about you as being sort of a nuts and bolts person who crosses the t's and dotted the i's.

And it was quoted in here that Mr. Perkins was particularly -- illustrating your attention to detail, how you became upset about a discrepancy between the corporate board of directors handbook and the H.P. bylaws, and that that subject matter took up hours of board meeting time.

Now, I'm just asking this question. Is that -- would you say that's an accurate characterization or not?

DUNN: I'm sure it's Mr. Perkins' view. My view is what happened was having been asked to take the job of non-executive chairman to bring H.P.'s governance practices up to best practice.

There were a lot of things that needed to be addressed in the foundations of the board's governance.

DUNN: It was in the province of the nominating and governance committee to address those. I asked Mr. Perkins to serve as chairman of that committee. And it was in that committee that his impatience with dealing with those matters showed itself most clearly.

He felt that that committee should be talking about strategy. I felt that the board should be talking about strategy, not the nominating and governance committee.

WHITFIELD: Who gave to the agencies that did the pretexting the names of the people that you wanted surveillance on, or you wanted their phone records on?

Who gave the list to the...

DUNN: They came up with their own list. I continue to be surprised by revelations of who was on it.

WHITFIELD: Oh, so they came back -- did they come back to you and give you the list and say: What do you think about this?

Or did you just wash your hands of it and say: You do it?

DUNN: Well, they asked me for -- I had to provide them input, context. I was like the person who had the problem, on behalf of the board that had asked me to do something about this.

And in any investigation, whoever it is who's got the problem has to explain the problem to the investigators.

WHITFIELD: Did you give them any names?

DUNN: No. I wanted them -- that was part of having a professional investigative team to be able to do whatever they do. And as I mentioned, ultimately, they concluded I was one of the suspects.

WHITFIELD: And you said that they'd used the standards at H.P. And yet, this was a particularly unusual event. Because I'm quite confident that there has never been a surveillance or an investigation of the entire board before.

DUNN: I'm sure you're right. And I believe that the surveillance was limited to their efforts to find out more evidence about whether Mr. Keyworth was in fact talking to a reporter after they had come to the strong thesis that he was the person responsible.

WHITFIELD: And you've had an opportunity, I guess, to -- have you had an opportunity to see the list of everyone that they investigated?

DUNN: No, I have not seen that list.

WHITFIELD: So you do not know who was investigated, then?

DUNN: I know some by -- well, if the press reports are correct, I know some.

WHITFIELD: Was Mrs. Fiorina investigated, from your personal...

DUNN: Yes, that one I read about recently.

WHITFIELD: OK. Now, did you receive a severance package at the termination of your tenure on the board, or when you resigned?

DUNN: I was never an employee of Hewlett-Packard. I did not receive -- I have not had one nickel of cash flow from Hewlett-Packard in six years, except for committee fees.

WHITFIELD: OK.

DUNN: So I'm kind of out of pocket for dealing with H.P. right now.

WHITFIELD: Now let me just ask one other question, and my time's expired: Were you the chairman of the search committee that brought Mr. Hurd to H.P.?

DUNN: I was the nonexecutive chairman of board. Our whole board was the search committee. But I did lead the search, administratively.

WHITFIELD: OK. Thank you.

I recognize Ms. DeGette.

DEGETTE: Thank you, Mr. Chairman.

Mr. Adler, you told me that the embedded technology, the tracers, is a standard technique used by Hewlett-Packard. Correct?

ADLER: You also used the word pretexting when you started the question.

DEGETTE: I know.

ADLER: Could you clarify that?

DEGETTE: Yes. You said the embedded technology, the tracers, is standard practice, right?

ADLER: Yes.

DEGETTE: What about pretexting? I think you told Ms. Eshoo that pretexting is also a standard practice.

ADLER: Within H.P.?

DEGETTE: Yes.

ADLER: I have no further direct knowledge of pretexting. All I can offer you is what I offered Congressman Markey, and that was there was a complaint by Mr. Nye that it had been utilized prior.

DEGETTE: You had never personally seen pretexting prior to this situation?

ADLER: I'm sorry, could you repeat that?

DEGETTE: You had never seen pretexting prior to this situation?

ADLER: No, I had not. Had I, I would have reported it.

DEGETTE: Had you heard of it?

ADLER: No. Actually, I'm a little naive. I had not even heard of it.

DEGETTE: OK.

Mr. Sonsini, as outside counsel to the corporation, what is your view of the use of tracer technology to track messages? Do you think that's an appropriate -- I'm not asking for a legal opinion -- do you think that's an appropriate technique in these situations?

SONSINI: Given what I've learned, I think any technique that invades privacy is not appropriate.

DEGETTE: Including tracer technology.

SONSINI: Including tracer technology.

DEGETTE: Were you aware tracer technology was at least attempting to be used in this situation of the board investigation?

SONSINI: I was not aware of any methodology that was being used in this investigation.

DEGETTE: Now, it seemed to me when I looked at some of the voluminous documents here, after Mr. Perkins made his allegations, and you were asked to look into that, the allegations you were asked to look into were the specific allegations that Mr. Perkins made. Correct?

SONSINI: Correct.

DEGETTE: Did anybody ever tell you that these investigators were using the tracer technology to try to trace messages?

SONSINI: No.

DEGETTE: Did anybody ever tell you that they were coming up with a fake individual to try to have communications with newspaper reporters?

SONSINI: No, none of that.

I assume you're asking me prior to our investigation of the investigation.

DEGETTE: That's correct.

Did anybody ever tell you that they were going through the trash of the board members or tracking their family members?

SONSINI: No.

DEGETTE: What advice would you have given if somebody had said this is what we're going to do to try to find the leaks on the H.P. board?

SONSINI: It would be totally improper.

DEGETTE: Why would that be?

SONSINI: Because I think it implicates, in many respects, the invasion of privacy. And although I'm not an expert on legality, certainly it doesn't seem to me to meet the standards of ethics and integrity that we ought to have at a corporate level.

DEGETTE: Right. I mean, it's not just -- we're all focused here on whether or not the pretexting is illegal. But in truth the rest of these techniques are just kind of sleazy and I would say not appropriate in a corporate context. Would you agree with that?

SONSINI: I absolutely agree. I think that in today's world, particularly after what Congress has done with Sarbanes-Oxley, we have emphasized that tone at the top is very critical in the role of corporate governance, and that means ethics, that means veracity and that means integrity. And those types of tactics don't have any place.

DEGETTE: And Mr. Sonsini, I think you would also agree with me that the tone at the top that you refer to should also refer to corporate boards and officers, and not just employees of the corporation. Correct?

SONSINI: It should begin with the boards.

DEGETTE: Exactly. This is what I've been saying for five years, ever since we started these investigations.

Ms. Dunn, I just want to turn to, just a couple more issues about this fake person that you folks were coming up with to try to get information out of reporters. And I'd like you to take a look at Tab 60, if you will, in your notebook.

DEGETTE: Are you there?

DUNN: I'm there. I have a moment...

DEGETTE: We have -- it's an e-mail or some kind of memo dated February 22nd, 2006, from Kevin Hunsaker to Mark Hurd with a copy to you.

Now, have you seen that, this top e-mail?

DUNN: I am seeing it now.

DEGETTE: OK. And underneath it, there's an original message from you, Patty, to these various people. Do you see that?

DUNN: Yes.

DEGETTE: Do you recall sending that e-mail?

DUNN: I must have sent it.

DEGETTE: And that's in response to an e-mail from Kevin Hunsaker to you and to Ann Baskins. And what that original e-mail says is they're going to propose sending this e-mail to the reporter with the hope that she would follow it to your target, the person who you thought was the leaker, and then what would happen.

And Kevin says, "I made up everything in the slide, trying to make it feasible."

So was it your understanding this was the fake individual Jacob who was going to send this out to the reporter? Is that your understanding?

DUNN: That is my understanding.

DEGETTE: And then you said in response to that: "Kevin, I think this is very clever. As a matter of course, anything that is going to potentially be seen outside H.P. should have Mark's approval as well." Is that right? That's what you said to Kevin?

DUNN: Yes. And what I testified earlier to was that I regret the use of the word "clever..."

DEGETTE: Right, I'm sure.

DUNN: ... because it does not convey what I was...

DEGETTE: Right. And I'm not trying to excoriate you for saying the word "clever," but my point is, you had said before, you just said: Go do the investigation and then they did it. And you didn't know.

But in fact, you knew as it was going along, that Kevin Hunsaker was doing this Jacob to try to get a reporter to respond, right? So you knew that was going on, right?

DUNN: I did not see myself, nor did...

DEGETTE: No, no, I understand. I'm just asking yes or no: Did you know that was going on?

DUNN: I knew and I did not see myself as the person who was appropriate to approve investigative methods.

DEGETTE: This is what I'm saying. And, Mr. Chairman, I guess I'll just say this, concluding this panel: At first, I didn't think this H.P. issue really rose to the level of the corporate responsibility issues that we looked at several years ago.

But I'm becoming less convinced of that, because this is exactly what we saw when we brought the executives from some of the other companies in. Of course, these were situations of fraud, where people had gone to jail. That's not what we're talking about here.

But it could happen with another corporation, if boards don't start to realize that this is a very serious problem, that you can't just say to somebody: Well, I'm only a board member or I'm not a compensated employee, and so I can put something into process -- that you can't just say to somebody, well, I'm only a board member, or I'm not a compensated employee, and so I can put something into process; I can be the general counsel; I can be on the investigative team; but I'm not responsible for things that happen because it's not in my chain of command.

DEGETTE: We can't have that anymore. There is a fiduciary duty that every board member of every corporation has to that corporation.

Ms. Dunn and Mr. Sonsini, you're both nodding. I think you would both agree with me and that's why I think we need to really look and see if there's any broader public policy implications to this. Because, Ms. Dunn, you knew that a lot of these techniques were going on. You just didn't think it was your job to do anything about it.

Mr. Sonsini, you were outside counsel and no one bothered to tell you about a lot of this.

I think it's very disturbing. I think it's a good case study.

Anyway, that's all I would have to say, Mr. Chairman.

WHITFIELD: Thank you, Ms. DeGette.

Recognize Mr. Walden for 10 minutes.

WALDEN: Thank you very much, Mr. Chairman. I appreciate the opportunity for another round of questions.

Ms. Dunn, I remain concerned, obviously, about what I've heard today. Based on what also is contained in some of these reports, I referred you again to Tab 119 in that huge book you were just able to slide past you there.

And in it -- item Number 14, it says -- and this is, again, from Tony Gentilucci. Stated DeLia told him sometime during the week of July 4, that pretexting was fully discussed with Dunn and Baskins in Kona I.

Do you dispute that that occurred?

DUNN: I'm just going to have to back to my earlier statement, sir. I had no understanding or knowledge of the fraudulent representation of identity as a standard investigative tactic at Hewlett-Packard.

The word pretext and pretexting means a lot to us now. It meant nothing to me in June of 2005.

WALDEN: On August 21st, a report from Kevin Hunsaker, number 118, I think. It's the interview of Mr. Hunsaker who, unfortunately, took the Fifth and has left the company.

Number 42 says one month into the investigation, the issue of pretexting came up again when Dunn and Baskins asked him to confirm the legality of the investigative method during a Friday phone call before the March board meeting in Los Angeles.

WALDEN: "Dunn and Baskins wanted him to confirm the method's legality in case Hurd had any concerns during the presentation in Los Angeles."

DUNN: Well, I think this is very close to true. I did ask for confirmation that the use of phone records in these investigations was permissible.

WALDEN: But it says here the issue of pretexting came up.

DUNN: Well, I think the word now has entered our lexicon as a substitute for the word phone records.

WALDEN: But why would you ask about the legality of it, then?

DUNN: That's what a board member does. You look for representations...

(CROSSTALK)

WALDEN: So they never described the process to you that they were using. I mean, he says they did. The issue of pretexting came up, they talked about investigative method.

DUNN: No one ever described to me that the fraudulent use of identity was part of the H.P. way of conducting internal investigations.

WALDEN: Right.

DeLia, though, I'm told, mentioned impersonation during the June meeting. Did that trouble you?

DUNN: If I'd heard the word "impersonation," it probably would. I do not recall it.

WALDEN: How did you think they were getting these phone records?

DUNN: My understanding was that these records were publicly available.

WALDEN: But I thought I read somewhere here...

(CROSSTALK)

WALDEN: Oh, that's right. Number 116.

DUNN: Which section, sir?

WALDEN: Tab 116. Page 5. And it says, "Dunn said that DeLia told her such information was basically publicly available." Right? You remember that?

DUNN: That's my testimony here today, yes.

WALDEN: Yes. That DeLia told you that "such information was basically publicly available," in quotes.

Then it goes on down. Number 30 says, "Dunn was not aware that one method for retrieving phone records entails that callers pretending they're someone else. Dunn thought that the investigators were able to get the information just because of the administrative sloppiness of the phone carriers."

What did you mean by that?

DUNN: What I meant was that I understood that you could call up and get phone records, that it was a common investigative technique.

WALDEN: So you think I can call up, as anybody in the public, and get your phone records?

DUNN: I thought a year ago -- I thought six months ago -- that indeed you could. I had...

WALDEN: Then -- you really believed that?

(LAUGHTER)

I'm sorry, but you believed that I could call whoever your carrier is and say "I'm Congressman Greg Walden and I'd like Mrs. Dunn's phone records"? Mail, home, office.

DUNN: It really did surprise me.

WALDEN: You're serious.

(LAUGHTER)

I'm not being funny here. I mean this. You honestly believed that it was that simple, that your phone records, that anybody in the world can just call up and get them? They're public -- is that how you would describe publicly available?

DUNN: We have to make a distinction between my knowledge and my knowledge during this investigation.

WALDEN: And that's where I'm trying to get.

DUNN: During this investigation, it was my understanding that these records were available through permitted mechanisms and that it was the common practice within Hewlett-Packard to use phone records to perform investigations.

WALDEN: But you said you thought they were publicly available.

DUNN: Yes.

WALDEN: Which means going to the Internet and putting in somebody's name and up pops my phone bill.

DUNN: That would be one idea.

WALDEN: What would be others?

DUNN: I don't know. I didn't give it much thought.

WALDEN: But then you go on to talk about through administrative sloppiness. That to me would say somebody's making a mistake at Ma Bell.

DUNN: That's a transcription. I don't recall using those words.

WALDEN: Mr. Sonsini?

SONSINI: Yes, sir.

WALDEN: Do you have any reason to doubt the summary of this? You have the transcripts.

SONSINI: I do not have any reason to doubt the transcript.

DUNN: This is not a transcript, like this woman is recording our comments.

WALDEN: That's correct.

DUNN: It's an interpretation of what I said.

WALDEN: You're right.

So tell me what you meant by administrative sloppiness. Did you use the term "administrative sloppiness"?

DUNN: I don't think so. If I did, I don't understand the way that it's appearing here, administrative sloppiness.

My understanding was that these -- sir, my understanding was that these records were available generally to investigations such as the ones that were being conducted at Hewlett-Packard.

WALDEN: Do you have any problem with us getting the transcripts, so we know exactly...

DUNN: If one was produced.

WALDEN: Mr. Sonsini, was one produced?

SONSINI: I'd have to ask my team, Congressman.

WALDEN: Is that yours or...

SONSINI: They are.

WALDEN: Was this recorded -- were these interviews recorded?

SONSINI: Yes, these were just the interview reports. They were not recorded.

WALDEN: So there is no transcript...

SONSINI: There is no recording of the conversation, other than the notes of those who made the inquiry.

WALDEN: But you believe these notes to be accurate?

SONSINI: I do.

WALDEN: And Ms. Dunn believes they're not.

DUNN: I believe -- this is the first time that these notes have produced for me. So I haven't had a chance to go through these notes.

WALDEN: But you've read the part I'm working on.

DUNN: No one has given me an opportunity to review either now or previously what I said.

My understanding is that, for example, if you give a deposition under oath, you get a chance to review those depositions to make sure that you -- that it's your sworn testimony.

WALDEN: This is all I have to work off of and there are lots of issues here where lots of people have reported in the course of the investigation that Mr. Sonsini's firm did -- that they believe you were told about pretexting and that the methods were described.

DUNN: I understand the problem. I understand the chain of communication and why it is confusing.

WALDEN: The part of the chain of communication I'm confused about is you've said, as an outside director, charged by a board of seven without an official board position -- I assume they were -- as I understand, seven board members, basically, said: Please, go do this. You didn't vote on it as a board, right?

DUNN: We did not. In fact, it was not a matter that could be brought to our full board.

WALDEN: OK, but seven directors -- and tell me you don't have a staff.

DUNN: No.

WALDEN: You interact with the investigative folks, you name the investigation, you provide phone numbers to the investigators for certain people you'd like them to look at, you're in interactions with your legal team and the investigators from time to time. You get briefed on draft findings of the investigative report. But you don't sign off on any of this yourself. You defer to senior management. Correct?

DUNN: With the addition that I did not hire these investigators.

WALDEN: I understand. I'm trying to get to a different point, and that is, who in senior management, then, is responsible for this investigation since you're not?

DUNN: Well, the last investigation was clearly under the auspices of Mr. Hunsaker.

WALDEN: He's your counsel. I thought I read here where, like, Mr. Hurd had to sign off on things. Is that not the case?

DUNN: Well, Mr. Hunsaker's title, by the time this investigation was part way through, and before, is -- his title was director of standards of business conduct and...

WALDEN: So he was the final decision-maker on this?

DUNN: No. He was...

WALDEN: Who was the final decision-maker.

DUNN: I would have said Ann Baskins.

WALDEN: Chief corporate counsel. So nobody else on the board -- not Mr. Hurd -- she could overrule every other decision. Is that what you're telling me?

DUNN: She was responsible for the oversight of the person carrying out the investigation.

WALDEN: So she reported to nobody.

DUNN: Well, she reported administratively...

WALDEN: To whom?

DUNN: ... to Mark Hurd in '06 and to Bob Wayman in '05.

WALDEN: Because at some point the buck stops somewhere.

DUNN: I'm trying to be responsive to your question about her reporting relationship.

WALDEN: That's what I was asking. I appreciate that.

My time's expired.

WHITFIELD: Thank you very much.

Mr. Schakowski's recognized for 10 minutes.

SCHAKOWSKI: Thank you, Mr. Chairman. I'm actually going to have leave in five.

Mr. Sonsini, I wanted to ask you some questions. Maybe we're going over some turf that's already been gone over, and I hope you'll bear with me. I want to explore it a little bit further.

I'm looking now -- it was Tab 91 in the big book, and this is the communications, the e-mails you have in June, the last one being your June 28th e-mail to Tom Perkins regarding your -- he had asked you -- he was very worried, he was asking you -- you should check into the sub rosa investigation of directors communication at H.P.

In the view of (inaudible) I guess that lawyer (inaudible) opinion that it was illegal, I think the board needs to know the potential risks.

And then you respond that, quote, "The process was well done and was in legal limits," unquote. And you continued that the phone records were obtained by pretexting and that it is, quote, "a common investigatory method which was confirmed with experts. The legal team also checked with outside counsel as to the legality of this methodology."

So I'm wondering who the experts were with whom you consulted.

SONSINI: As the e-mail indicates, I went directly to the H.P. legal department. I went to Ms. Baskins and she went to Mr. Hunsaker.

I requested that they give me a response to these concerns of Mr. Perkins.

Please understand that I was not conducting any investigation at that time, was not asked to, and was not rendering any legal opinion, but I believed that he needed to have a response.

SONSINI: I asked for a detailed response. I got two written responses, plus oral assurances and I reported it to Mr. Perkins.

Based on those responses only, without any independent judgment, I made the statements that I made here.

SCHAKOWSKY: So your legal team and outside counsel didn't check to determine whether pretexting was legal?

SONSINI: Not at that time. Not at that time at all. When we got the report, we were asked to focus, as Ms. Dunn has testified, to what do we do with the results. We have a crisis. The board was looking to me. We need corporate governance here. What are we going to do with this?

And I laid out a plan that we had to have full disclosure to the board; this had to be vetted out, et cetera.

It was afterwards that the board, through the nominating and governors' committee came to me and said, we need you to look into the legality of this, and it is then that my team conducted the investigation and came to the findings that we came to.

SCHAKOWSKY: So, you didn't check, but you conveyed to Mr. Perkins, essentially, that you had?

(CROSSTALK)

SONSINI: With all due respect, my e-mail was very careful. I told him: This is where I went and this is what I learned.

Mr. Perkins was not a director at the time. The question is whether Mr. Perkins had any standing to even request me to do anything. But because I believed that it was important to get this fully reported, and because I believed that the was entitled to know what legal counsel would say, because he was a director at the time, I asked him, what do you want me to say? Give me a thorough response. I got it and I conveyed it.

SCHAKOWSKY: He was clearly very worried at that time about the sub rosa investigation and so you're saying the team did not check the Federal Trade Commission.

SONSINI: I don't know what the team did, other than what they gave me.

I was not involved in this investigation. When they said that they conducted this legally, when they issued a report that I received in April, well after the investigation was done, that it was done within lawful limits. They were relying on their own experts. They said that they reviewed it. They said they researched it.

You know, the H.P. legal department is a big department. It has over 100 lawyers. I've worked with them for years.

Not all matters are farmed out to outside counsel. And when they are farmed out, they're not all farmed out to Wilson Sonsini. They have multiple lawyers.

I was given a specific task, and it was a crisis -- there was a crisis in this boardroom. As I said, I believe a leak is a symptom of a bigger problem. And that's what I focused on.

And I want to make that very clear, that the press has it all wrong that I was passing upon legality at that time. I passed upon it when I was required to do it, and I passed upon it thoroughly and strongly and made very difficult findings that were conveyed to the board.

SCHAKOWSKY: So then, you don't stand behind the fact -- well, except the fact that you say "it appears." But you say that the process was all well-done and within legal limits. The concerns raised in your e-mail did not occur. That's a declarative sentence.

SONSINI: At that time, and as I repeated, I was passing on information. I demanded that the information be thorough. And it is correct -- it appears -- I was very careful with this e-mail: Mr. Perkins, this is where I went, this is what I was told. On the basis of that, it appears -- I was not saying it was legal at that time.

I did not understand the methodologies that were involved. There was a lot more that we needed to find out, and we did find out. And that's when we started passing on legality.

Mr. Perkins took my e-mail. He thanked me for it. It gave him the information he wanted. And we were on our way.

SCHAKOWSKY: Yes, the information that he got was reassurances, quote, "the concerns raised in your e-mail did not occur."

I would have felt -- I would have liked it, too, and thanked you.

SONSINI: I don't think Mr. Perkins was asking me for reassurances. Mr. Perkins had counsel at the time, Mr. Dinh (ph). He had the opinion of Mr. Dinh (ph) concerned about legality. That's what he told me. And I was giving him the information.

SCHAKOWSKY: Thank you.

(UNKNOWN): Ms. Schakowsky, would it be possible for you to yield to me for just a brief question?

SCHAKOWSKY: Sure. I'd be happy to yield.

(UNKNOWN): Thank you.

Ms. Dunn, I have one more question for you on this topic. It's Tab 66. And this is an e-mail from Kevin Hunsaker to Vince Nye, Mr. Adler, Mr. Gentilucci, Mr. Anthony (ph), Mr. DeLia. It said, "I just got off the phone with Patty. She would like us to put a comprehensive summary of what we've done, what resources and techniques we've used, et cetera. It should include everything we've done on the E.C. (ph) folks, the board members and other employees.

"It should also include things like our" and in parens "unsuccessful attempts to obtain the E.C. (ph) member's cell phone records, et cetera."

It's dated February 24th of '06.

Did you indeed have a conversation with Mr. Hunsaker on the phone on that date where you asked about resources and techniques?

DUNN: I have no reason to think that he would write this e-mail without our having had that conversation. I do not remember this specific conversation. It's quite logical that it took place.

(UNKNOWN): Right.

DUNN: I believe what was going on here was that we were preparing for the issuance of the report that he -- a final draft or early draft of the report that came out on May 10th, and I wanted to -- I'm sorry, March 10th.

(UNKNOWN): March 10th, OK.

DUNN: And I wanted to convey to him -- I'm not sure I conveyed all the details that he says I conveyed. He may have been using the fact of a conversation with me, as sometimes happens in big companies, to put his own momentum behind something that...

(UNKNOWN): Oh, so you think this wasn't what you said.

DUNN: I don't know that I said all of these things, but it would be very logical that I would have said, "Kevin, when that report is written, it needs to be complete. It needs to have everything in it that you've done."

(UNKNOWN): I guess I'm questioning, if you weren't in charge of the investigation, and you only focused on the last couple pages, why were you giving him that much direction?

DUNN: Because I had a responsibility and was thinking ahead about what our board was going to receive as a basis for making a very important, very sensitive decision about a fellow director.

(UNKNOWN): But this is really pretty specific about resources and techniques. Doesn't get much beyond that.

DUNN: Well, that's his interpretation of our conversation.

(UNKNOWN): OK. Thank you.

Every one of these e-mails we have, Mr. Chairman, seems to have a different interpretation, depending upon who is reading it.

Thank you.

WHITFIELD: The gentlelady from Tennessee is recognized for 10 minutes.

BLACKBURN: Thank you, Mr. Chairman.

And thank you to all of you for your patience.

Mr. Adler, I had had a couple of questions for you. In going back to your testimony, which with all of my papers now I have misplaced, but you talk -- I think it was on Page 2 of your testimony where you talk about the standards and having standards that apply.

And you mention in your testimony, several different times, standards, legal standards, and then my assumption is H.P. standards that would be applicable to a corporate investigation.

Would I be right in that assumption, sir?

ADLER: No. The standards I refer to were the H.P. standards of business conduct, which would be applicable to all employees.

BLACKBURN: OK.

ADLER: And also, as you said, the legal standards, which are, again, applicable to everyone.

BLACKBURN: OK. And is that a criteria, a set criteria that exists in writing or was that just something that in your department, with Mr. O'Neill (ph) as your supervisor, you all had devised kind of a best operating practices.

ADLER: The H.P. standards of business conduct are in writing. Every year, employees are required to review those standards and are given training in them.

BLACKBURN: So this was widely known?

ADLER: I'm sorry?

BLACKBURN: They were standards that were widely known?

ADLER: I'm sorry, one more time.

BLACKBURN: They were widely known.

ADLER: The standards of business conduct were widely known, yes.

BLACKBURN: OK. Another question. In reference to using the spyware, as we call it, the tracer -- you mentioned that attorneys had reviewed the information. Which attorneys reviewed that for you?

ADLER: I think we're getting this confused, perhaps, slightly. Attorneys reviewed with regard to -- I know I did state that with regard to the pretexting?

BLACKBURN: Yes, sir.

ADLER: That was in my statement. I was...

(CROSSTALK)

BLACKBURN: But it did not apply to the investigation as a whole?

ADLER: The attorney -- well, Kevin Hunsaker, our chief of ethics, is an attorney, and we worked at his direction. He was our counsel. And so everything was reviewed by him for legal compliance.

BLACKBURN: OK. Thank you.

ADLER: You're welcome.

BLACKBURN: Ms. Hurd, I want to stay with this tracer.

DUNN: I think the real Mrs. Hurd could be a little surprised by that.

(LAUGHTER)

BLACKBURN: I mean, Ms. Dunn.

DUNN: Thank you, yes?

BLACKBURN: And the relationship between you and Mr. Hurd. And I'll tell you where I'm going with this. I'm going to read from your testimony again that you supplied to us yesterday, and I'm on Page 20 and the first paragraph.

BLACKBURN: OK. Where you say, "Neither Mr. Hurd nor I designed or implemented the investigative techniques, however we both were made aware of a sting operation that the investigators proposed in early February for the purpose of determining whether the CNET reporter to whom Mr. Keyworth was suspected of talking. And, by then, the investigative team had narrowed its hypothesis of the identity of the leaker to him was in contact with Mr. Keyworth.

"I was contacted by Mr. Hunsaker with Ms. Baskins in Duluth on the communication about this.

"Having asked for and received all needed assurances that this was a legal and common investigative technique, I referred them to Mr. Hurd for the final decision."

Now, did he, indeed, make the final decision about moving forward with all forms of the investigation?

DUNN: With all forms of the investigation?

No, I don't think that is true. I think that the methods were delegated to Mr. Hunsaker with oversight from Ms. Baskins.

BLACKBURN: So he made the final decision on the sting operation.

DUNN: I believed that he needed to be aware of it. I don't know that the way in which he communicated his views back to the investigative team.

BLACKBURN: I just have such a difficult time trying to figure out who -- where did the buck stop? In H.P., where did the buck stop with making the decision to conduct the sting? Where did the buck stop with making the decision to use the tracer technology?

Because Mr. Hurd's going to come and tell us on Page 7 of his testimony that they, let's see, "In February '06, I was informed by the investigation team that they intended to send an e-mail to a reporter containing false information in an effort to identify the source of the leak. I was asked, and did approve, the content of the e-mail.

"I do not recall seeing, nor do I recall approving, the use of tracer technology."

Well, we've got two different things going here. One is the spyware, if you will. And that is attached to the e-mail. And another is the content, the text, that is in the e-mail.

BLACKBURN: And it is of tremendous concern that we don't seem to have anybody that wants to say, "Yes, indeed, I was in charge, I was expected to be in charge, and I made the decisions accordingly."

So I'm trying to get to that. Let's go to...

DUNN: I think some of those people have just declined to testify, and that's frustrating for us all.

BLACKBURN: OK, let's go to Exhibit 52.

DUNN: Would that be Tab 52?

BLACKBURN: Yes, ma'am.

DUNN: I'm there.

BLACKBURN: OK. Great.

OK, this is an e-mail from you, starting with the original message.

"I spoke with Mark. He's on board with the plan to use the info on new hand-held leader (ph). He also agrees that we should consider doing something with the adaptive enterprise branding issue, given there is some chance that D.K. will seek clarification on this from her CNET source."

And then his response, the response coming back to you: "Understood. Thanks. We will put this in motion in the next few hours."

So this e-mail seems to indicate that Mr. Hurd was not only aware of the operation, but he was making suggestions to you or somebody as how to implement it. Is that accurate?

DUNN: That doesn't feel like what happened to me.

BLACKBURN: OK.

DUNN: What happened was that this team was devising methods to finalize the investigation, to be very confident that they had identified the correct person after nearly two years of problematic leaks, and that they were enthusiastically sharing their ideas with the most senior people that they could find.

And I don't know how Mark responded per se.

DUNN: I would respectfully say that that's a question for him to answer, because it would be hearsay on my part.

BLACKBURN: OK. All right. Thank you.

Mr. Chairman, I yield back.

WHITFIELD: Thanks very much.

At this time, I recognize Mr. Inslee for 10 minutes.

INSLEE: Thank you.

Mr. Adler, I wanted to ask you about the tracer technology. And I want to make sure that I understand how it worked.

As I understand, H.P. would essentially send an e-mail with an attachment with this attached to Mr. Smith, and when Mr. Smith sent an e-mail to Mr. Jones, somehow that would report back to H.P. indicating that Smith had sent Jones this document.

Is that how it works?

ADLER: No, sir.

INSLEE: OK. Tell me how it works then.

ADLER: It's dependent upon, well, the document itself, not the e-mail. The document is within the e-mail. The document itself must be opened.

INSLEE: Correct.

ADLER: Is that what you said?

INSLEE: No, you correct me. I'm sorry. You were accurate. I misstated it. It was the delivery of the document that is reported back to H.P. Thank you for correcting me.

ADLER: It does not report back to H.P. It reports back to the company that provides the services: readnotify -- all one word -- .com. And through the auspice of your personal account, you may then open the account and see if a return receipt has been provided for that particular document.

INSLEE: And when does that information come back. Is it essentially contemporaneous with Jones, the recipient of the second e- mail, opening the document? Does it happen right away?

ADLER: Any time the document is opened, there is a report that is generated.

INSLEE: So you attempted to distinguish this from a trap-and- trace system or an eavesdropping system or a tap by saying it's not contemporaneous, this pretty much is contemporaneous, isn't it?

ADLER: No, not really, because it's...

INSLEE: I mean, as soon as Smith gets it and opens up the attachment, boom, that goes immediately back to this company, is that right?

ADLER: But Smith has already received the attachment and therein, I believe, lies the difference.

INSLEE: I just want to make sure I understand this.

INSLEE: When Smith sends e-mail to Jones, as soon as Jones opens that attachment, immediately that information goes back to the reporting agency. Is that correct?

ADLER: That is my understanding. As soon as the document is opened.

INSLEE: Now, is it my understanding that H.P.'s corporate policy is that that is an acceptable corporate strategy, to use trace technology like this when H.P. decides to use it? Is that H.P.'s decision now and was it during the scope of this investigation?

ADLER: That was and still is current policy.

INSLEE: So let's say that you have a customer of H.P. You do business with them. You sell them products. They are your trusted, treasured customer to whom you expect to have a relationship of great integrity. You believe, and it is currently H.P.'s policy, as I understand it, that you can send an e-mail to them with this tracing system.

Let's say you send it to Acme Electronics, your good customer. And when Acme Electronics then sends an e-mail to Smith, let's say their attorney, they send an e-mail to their attorney or to their priest or to their doctor, in what they may consider to be a confidential communication, free from the prying eyes of H.P.

As soon as their priest or their doctor or their accountant or their neighbor or their friend or just one of their (inaudible) opens that attachment, H.P. will then get back a report immediately that this e-mail has been sent to that location, even though your customer has never been informed you're going to do that.

Is that pretty much H.P.'s operating procedure?

ADLER: No. Number one, we don't send this type of -- we don't use this type of technology with our customers.

Number two, in the sense that there is no information from the recipients that is derived, other than the I.P. address -- that is, the Internet protocol address -- that is all we get. That address may only tell us that it's in the United States, that it's in the world or in a specific region.

What we attempted to do is we suspected it would be Mr. Keyworth that would be the recipient. The best that we would have found out from his I.P. address reporting back to this renotify would be that it would have been in the Oakland area of Northern California for an AOL customer. That's the best it would have discerned.

INSLEE: I want to make sure I understand. You used that I.P. to eventually find out where the e-mail is being sent to. That's the reason you did this. You didn't do this for a statistical sort of information purpose. You were going to use this to find out where those e-mails were being sent. That's obvious to everybody in this room. So that's pretty clear.

Now, you said you don't do it to your customers. I can see a situation where H.P. would want to know if your customers are having communication with your competitor for instance, a potential contractor who's a competitor of yours.

INSLEE: Is there an internal policy that prevents any of your thousands of employees from doing that?

ADLER: I would consider it in violation of our standards of business conduct, yes. So the answer would be yes, sir.

INSLEE: What standard would it violate?

ADLER: Since I don't have them in front of me, I can't specifically recall which one would be the specific one that would apply in this case. I'm sorry.

INSLEE: Mr. Sonsini, is the use of that trace technology legal in your opinion under federal and/or state law?

SONSINI: That's a great question. I think the law regarding that is not as clear as it should be. Depending on how it's used and the methodologies, it could very well implicate federal or state statutes.

I think the whole area is an area that we probably need more clarity.

INSLEE: I agree with that assessment. And we -- many of us here -- have been trying to get more clarity regarding privacy laws, including the chairman, Mr. Barton, has been involved in some efforts in that regard.

But we have been stymied. We have this simple bill -- just so you'll know what's going on here in Congress, we have a bill that we all voted for unanimously. We can't even get House GOP leadership to schedule for a vote now.

But let me ask you this: Do you think, knowing what you consider to be a grayness in this area, would you suggest that there should be statutory codification clarifying this situation regarding trace technology on these e-mails?

SONSINI: I think so. We do have computer statutes that make invasion of computer hardware illegal. And I'm not an expert on how tracers are used in invasion, but if there is invasion of computers, we probably have good coverage.

But in the whole area of pretexting and the various methodologies used, I agree with the statements of many members of your committee that we should have more clarity in that area.

That does not mean that methodologies that are employed cannot be in violation of law -- existing law.

INSLEE: I want a clarification of something that I just did not understand. I understood you in earlier testimony, you said something to the effect that this pretexting and similar types of efforts were a violation of privacy and should not be common, something to that effect.

And what I didn't understand about that you received this draft, I understand there was a copy sent to you from Mr. Hunsaker which described the pretexting that had gone on in considerable detail, then you wrote -- that was on June 21st, 2006.

Seven days later, on June 28th, 2006, you wrote an e-mail to Mr. Perkins basically saying everything's hunkydory. There's nothing illegal.

And I'm reading this document, this e-mail from you, that doesn't -- a fair reading of it, I think, is raising no red flags or a concern from you, as counsel.

INSLEE: Now, given your testimony to us today that you consider pretexting to be -- sinful is the wrong word, but unacceptable, a violation of people's privacy, how do you juxtapose this when you're a lawyer; you've been told this is going on with one of your treasured clients.

Somebody asks you for a report. You sent them an e-mail and you don't raise any red flags whatsoever.

I have trouble reconciling that.

SONSINI: Well, let me explain it. As I've testified to several times today, and I'd like to elaborate on it again, that e-mail to Mr. Perkins was not a legal opinion because, A, I had not conducted any research; B, I was not aware at that time of the methodologies used. I was conveying the opinion of the H.P. legal department.

INSLEE: Well, what do you mean you didn't know the methodology? That's where I have trouble. You were told in this that they were doing pretexting.

SONSINI: Yes. And pretexting, generally, other than the Gramm- Leach-Bliley Act relating to financial institutions, is not illegal. It depends upon the methodologies in pretexting.

For example, if Social Security numbers are used, then it is very likely that there is a violation of the Social Security statute. There are other laws. The Federal Trade Commission takes the viewpoint that it could be an unfair trade practice.

The point is that, as members of the committee have said, we need more clarity. You have a bill in the House now that is designed to clear things up.

INSLEE: Let me ask just a simple question. Pretexting, to anybody here, means you call up and you lie about your identity in order to get information. To any lawyer or lay person, that's what it means.

You were told that people at H.P. were calling up to get phone records, lying about their identity and getting that phone record. And then you sent an e-mail that didn't raise any concern suggesting that it stop, suggesting that the method, the investigating. You didn't suggest whether Social Security numbers were involved. You did not suggest that you clarify as to whether or not you were violative of these. You didn't suggest anything suggesting that this thing was unacceptable.

And I just find that unacceptable and I don't understand it.

SONSINI: I want you to understand it. It's a fair question.

SONSINI: I didn't know what pretexting was. I had no knowledge of the methodologies. I did not know Social Security numbers were used. That is the problem. At the time that I sent that e-mail, I was being as open and transparent as I could.

I was not an expert in these matters. I did not know what pretexting meant at that time.

I was not asked to investigate at that time. I was trying to do my job of reporting to him what the H.P. legal department gave me the assurances that they did.

INSLEE: Just one more question. Do I understand you didn't know pretexting involved lying about the identity?

SONSINI: I didn't know what pretexting was.

WHITFIELD: Gentleman's time has expired.

Ms. Eshoo, you're recognized for 10 minutes.

ESHOO: Thank you, Mr. Chairman.

Well, I think that we've -- there's an awful lot that's been set down for the record, and I think that members have really asked excellent questions from both sides of the aisle.

I have a few questions. I don't know whether I'll use all the 10 minutes or not, but I want to go to Mr. Adler first, again.

Are you aware of any rusing that has been used in anything at H.P.? Is it something employed by H.P.?

ADLER: No, not really.

ESHOO: Did you hear me?

ADLER: Yes. This is an unusual circumstance, as far as my knowledge is concerned. You said rusing -- correct?

ESHOO: Yes.

ADLER: No, this is pretty much -- this is unusual. It's not something that I -- are you -- maybe...

ESHOO: I mean don't want your opinion about what you think of it, I want to know if it is something that is practiced or used? Is it a tactic that's used? Or has been used? At H.P.?

ADLER: OK. What do you consider to be a ruse so I can better answer your question?

ESHOO: You were just describing it to me. I mean, if you don't know, then I'll describe it to you.

ADLER: I mean, if you want to talk about the use of the e-mail by the name of Jacob, that's the first time we're ever employed that to my knowledge.

If you want to talk about the tracer technologies in that context, then we've used it, as I said, probably a dozen or two dozen times that I am aware of.

ESHOO: It's a few shades off from the pretexting, for sure, but it is still a deceptive method that's used to secure information.

It could be used by an employee, used by a relation to impart or to convince the third party that it's the authentic party requesting the information.

If you say no, then I'll accept your answer.

ADLER: OK.

ESHOO: You said no?

ADLER: No in regard to what?

ESHOO: Well, you know what, you have to be smart to play dumb. So I think I've been pretty direct about my questions. I asked you if rusing has been used. And you asked me to define it. I give it to you, and then...

ADLER: Yes, rusing has been used.

ESHOO: You're confused?

ADLER: It has been used.

ESHOO: It has been used.

ADLER: Yes, ma'am.

ESHOO: And for how long?

ADLER: I don't know. I would say probably for the last three years or so that I'm aware of since I've been there.

ESHOO: All right. All right.

I want to get back to Mr. Sonsini. What is there today, in terms of our laws, that direct themselves to the situation that the H.P. board found itself in? And that is a director that lied consistently that he had not leaked, when it was determined by -- in pretty bad ways, but it was still determined that he was the guilty party. Damaging information. Damaging, I think, in terms of shareholders and certainly, in my view, violated his fiduciary responsibility.

In advising the board, or if you were to advise the board, what are the options that are available for a publicly held company when they have a director that they can't fire. I mean, I don't know what the terms are at H.P.

ESHOO: They're probably going to go back and look at this, because there's a lot of talk in politics about term limits. I think they may have to look at term limits there, shortened term limits.

But is it simply the manual of ethics of the company? Or are there other instruments that can be used or be brought to bear in this kind of a situation? Because I don't think that, with all due respect to H.P., that this is totally unique to them. Human beings make up boards. Human beings are less than perfect.

God knows there's leaking. We know, sitting up here, that there are leaks. And this is something that people are tempted to do. I'm sure in the private sector as well.

SONSINI: Well, what we do -- and it's a very good question -- and it's very consistent with what we did back in January of 2005 or February.

First of all, it's very important that boards continually evaluate themselves. Peer-to-peer evaluations and board evaluations, where you have candid review of what you're doing and what people are doing.

Secondly, it's very important that boards adopt guidelines that deal with fiduciary duty issues, confidentiality and the like.

ESHOO: But there aren't any -- are there any federal or state laws or agency to go to...

SONSINI: There's no such law, other...

ESHOO: ... example, the SEC, and say, "Our hands are tied...

SONSINI: No...

ESHOO: "... but we believe that there's something wrong here"?

SONSINI: It's corporate law. It requires directors to exercise due care and duty of loyalty and duty of candor. And if they step over the bounds, they're in breach of that fiduciary obligation. They lose the protection of the business judgment rule that shields them from liability, so they have personal liability exposure.

And that is the tone at the top that you have to...

ESHOO: Can the corporation sue them, (inaudible) if they make a determination...

SONSINI: Yes. If a director breaches a fiduciary duty and harms a corporation, the corporation has been harmed and it could bring legal action, yes.

ESHOO: Well, there is an area where the law really comes into play, and that is in terms of tipping. But that's a whole other standard. That's a whole other standard.

Thank you.

Ms. Dunn, you have testified today, more than once, that you didn't direct the investigation, in other words, conduct it. That this was an internal unit within H.P. management, that they executed and contracted out or had someone on retainer that did this.

You also said that you found out when other members asked -- others that were investigated. And how did you find out that you were pretext?

Was it through the press, or you were told that you were going to be?

DUNN: No, I was not told I was going to be. But in all candor, there's been such a torrent of information that has come to me in the last three or four weeks about this matter, I can't tell you how I found out.

But it was within the last three or four weeks that it came -- someone told me that I had been pretexted, which I hadn't realized previously.

DUNN: And I'm sorry, I just can't remember who told me. If I could consult with my attorney, he may remember, but I don't.

ESHOO: I just thought that it was interesting in terms of your testimony that you were as well.

So was the whole board investigated by...

DUNN: My understanding is that...

ESHOO: Maybe Mr. Adler knows.

Mr. Adler, was the entire board investigated?

ADLER: Yes, ma'am.

ESHOO: Everyone?

ADLER: Yes, ma'am.

ESHOO: All nine?

ADLER: Yes.

DUNN: That's the first I'm knowing this fact, so that's an interesting fact.

I'd like to throw in that, you know, the attitudes by director toward their privacy versus the confidentiality of the company they serve seems to be very different from the general public. I'll draw your attention to an Associated Press survey that was done in the last week to 10 days, well after...

ESHOO: I saw that. I read that in your extended testimony. I thought that was very interesting.

DUNN: ... well after the matter hit the press. And it turned out that 85 percent of directors surveyed believed that their personal privacy was secondary as director to the needs of a company to uphold confidentiality.

And I've had directors say to me since this matter broke, many directors from well outside of H.P., that when they join a public company board they assume away a lot of privacy rights. It comes with the territory.

Now, I am not condoning the misrepresentation of identity through pretexting. I have said and would like to repeat...

ESHOO: I understand.

DUNN: ... that I think there needs to be a much clearer legal backdrop for that activity.

ESHOO: I want to get back to -- I have my needle stuck on something.

(LAUGHTER)

From what I'm hearing is that, regardless of what a member of the board, a director does, there really are not tools or instruments to remove that member other than kind of appealing to the director and saying: We don't think you've lived up to your fiduciary responsibility or whatever the case may be.

Is there something or is there not? I mean, what is there to prevent this in the future? And are there any instruments to, indeed, punish someone if they don't live up to that? Is it simply -- I shouldn't say simply. I know that the standard of business conduct is very important. But is there anything else?

I think Mr. Sonsini would probably want to answer that.

SONSINI: Right.

ESHOO: Thank you, Mr. Chairman.

SONSINI: Director serve at the pleasure of the shareholders. The shareholders are the ones who can appoint and can remove directors. Boards can't remove directors.

What boards do is they have to evaluate themselves and decide who should stay in as directors.

If a director takes action that harms the corporation, that director can be sued and has liability. That's basically the state of the law.

ESHOO: OK. Thank you.

WHITFIELD: Mr. Markey is recognized for 10 minutes.

MARKEY: Thank you, Mr. Chairman.

Ms. Dunn, on page 20 of your testimony, you say that in early February of this year, both you and Mr. Hurd were briefed about a sting operation proposed to send a fake e-mail to a CNET reporter, is that correct?

DUNN: That is my testimony. Yes, sir.

MARKEY: Were you both told that this e-mail would include an attachment that had a tracer or spyware in it?

DUNN: I never heard the word "spyware" in connection with this investigation.

MARKEY: Did you hear the word "tracer"?

DUNN: I did hear the word "tracer."

MARKEY: What did you understand that to be?

DUNN: I understood it was a way of confirming the receipt of an e-mail by someone who was under investigation.

MARKEY: So you did not understand it to mean that it would perhaps open up, then, this reporter's file that would make it possible, then, to trace where that reporter would be going in terms of phone calls or other communications to other people?

DUNN: No. That's not my understanding of how it works. And perhaps Mr. Adler could clarify how it works.

MARKEY: What did you understand the word "tracer" to mean?

DUNN: That it would simply confirm whether a certain e-mail had been received. And not necessarily by the person, but by someone in, let's say, the area the size of the Bay area.

MARKEY: OK. So in order to catch a leaker on the board, an investigation was launched. The concern was that these leaks were hurting H.P. The board members have a fiduciary responsibility not to hurt the company but to grow it.

And so investigating H.P. directors was deemed fair game, given their role at H.P. But what thought was given to whether it was appropriate to spy on reporters who have no relationship, fiduciary or otherwise, with H.P.?

DUNN: The spying on reporters was not something that was brought in any clear way to the attention of certainly me. I don't know about Ms. Baskins. But I did learn, on September 6th, that reporters had been pretexted.

MARKEY: Can I just say this, Ms. Dunn. You understand that you're the chair of H.P.

DUNN: I was the chairman.

MARKEY: You were the chair of H.P. And it's one of the leading technology companies in the world. And you are testifying here, to a decided lack of knowledge of technology and its uses, which to a committee with jurisdiction over the telecommunications industry, is a little bit disconcerting, to be quite frank with you.

DUNN: May I respond to that?

MARKEY: You may. We're congressional experts. But that means that we're only experts compared to other congressmen. I mean, that's the table for experts. You're an expert.

DUNN: I am not an expert in technology. And that was not my role on the H.P. board. A board is composed of individuals with different skills.

MARKEY: I understand. I understand what you're saying. But these are specific conversations about the technologies that can be used. I understand.

DUNN: My particular skills were not in technology, and that was not the role I fulfilled on the H.P. board. I was considered a financial expert and, ironic though it may seem to you now, also an expert in corporate governance.

MARKEY: OK. So who believed that it was appropriate to spy on non-H.P. individuals in this investigation, Ms. Dunn?

DUNN: I don't know who at my level or Mark Hurd's level considered it was appropriate to spy on reporters.

MARKEY: So are you saying that you didn't understand that the attachment with the spyware was an intrinsic part of the sting? You didn't understand that?

DUNN: The word "spyware," was never a part of what I understood to be the case...

MARKEY: Well, some similar type of term to describe what was going to be -- what the plot was with regard to this reporter, not necessarily spyware.

DUNN: As Mr. Adler has testified, this is a common investigative technique that has been used -- and I'm just quoting his testimony -- one dozen to two dozen times at Hewlett-Packard in sensitive investigations.

It is still the policy of H.P. that this technique is a standard and acceptable part of its arsenal in investigative (inaudible)

MARKEY: Did you receive any subsequent reports as to the success, the subsequent success or failure, of this sting?

DUNN: I heard by the by that it didn't work.

MARKEY: That it did not work. And the vine is -- can you give a name to the vine?

DUNN: I'm sorry.

MARKEY: Does the vine have a name?

DUNN: No, no. I'm sorry. I was saying "by the by."

I heard somewhere within the chatter, if you will, that it hadn't worked. I don't recall a specific communication.

MARKEY: And how often is this technique used on non-H.P. individuals?

DUNN: I don't know. The only knowledge I have of it, firsthand, is in this matter.

And I was quoting Mr. Adler's previous testimony as to its use at H.P. otherwise.

MARKEY: OK.

Mr. Adler, how often is this technique used on non-H.P. individuals?

ADLER: I can only speak from my own personal experience, and I'm venturing a guess as to the rest, sir. I know that I have used it at least on two occasions on non-H.P. persons.

MARKEY: And who were those persons?

ADLER: Excuse me?

MARKEY: Who were those persons?

ADLER: One was the reporter, Ms. Kawamoto. And also on a suspected theft suspect in Houston. I don't recall his name.

MARKEY: And to the best of your knowledge, those are the only two occasions where H.P. used this technique on non-H.P. individuals?

ADLER: The only two occasions that I used it. I know that my co-workers have also used it. I know that law enforcement uses it.

MARKEY: I'm talking about just H.P. itself, not law enforcement. You're saying, at H.P., it has been used by other individuals as well on non-H.P. individuals?

ADLER: Yes, sir.

MARKEY: Are you talking about a handful of times, or is it a prevalent practice?

ADLER: I think I offered earlier one to two dozen times that I estimate, in totality.

MARKEY: Thank you.

Mr. Sonsini, you are one of H.P.'s outside legal counsels. Were you at all involved in the company's 8-K filing made earlier today, disclosing the fact that H.P. had concluded an agreement with Ms. Baskins that provides her with a multi-million dollar golden parachute?

SONSINI: No, I was not.

MARKEY: OK. Thank you.

Mr. Adler, you say that you were advised that this opinion was the result of a review by at least two attorneys. Were you told who the two attorneys were who provided the legal opinion that you relied upon?

ADLER: The two attorneys that I referenced were Mr. Hunsaker and an outside attorney whose name I don't know.

MARKEY: Now, Mr. Adler, did you ever read any legal memos or e- mails from these two attorneys that explained their basis for their opinion?

ADLER: No, I did not.

MARKEY: I would like to turn to a Saturday, January 28th, 2006 e-mail that H.P.'s senior counsel Mr. Hunsaker sent, and also copied to H.P.'s global security manager, Mr. Gentilucci, and your colleague Mr. Nye.

This e-mail says this: "Hi, Fred. Apparently, Perkins almost never uses his cell phone and instead does just about everything by way of text message. Is there any way to lawfully get text message content, or is it the same as his cell phone records?"

Now, when Mr. Hunsaker writes to you asking is there any way to lawfully get text messages' content or is it the same as cell phone records, doesn't that suggest that, as of January 28th, 2006, that Mr. Hunsaker already was aware that getting phone records was illegal?

ADLER: Illegal. Possibly, yes.

MARKEY: I think it's clear it's yes. Is the law the same as cell phone records, that you can't get them. So he knows in January of this year that it's illegal.

Now, Mr. Adler, just 13 minutes after this e-mail was sent to you, you replied back to Mr. Hunsaker: "Even if we could legally obtain the records, which we can't unless we either pay the bill or get consent, I would highly suspect text messaging records are not kept, due to volume and expense. The only other means is through real-time interception, an avenue not open to us."

ADLER: Correct.

MARKEY: Doesn't your reply to Mr. Hunsaker indicate that you, too, were aware of the fact that it was already illegal to obtain phone records unless you are the person paying the bill or you obtained the consumer's consent?

ADLER: Correct. Yes, sir.

MARKEY: So you believed it was illegal, then, as well, in January?

ADLER: In January, yes, sir. In January yes, I did.

MARKEY: So you believed it was illegal in January.

ADLER: Yes.

MARKEY: And so this is something, as a result, that had a long fuse inside of H.P., this knowledge that this was illegal activity. In other words, we don't have to pass any new laws to make this illegal. It is illegal right now. And you knew. Others knew. And it is clear that, from my perspective, Mr. Perkins at least came to know that and appreciate that fact, and it disturbed him greatly.

So I know that we're just at the tip of the iceberg here, Mr. Chairman, but this is very disturbing testimony that we are receiving. And again, I want to congratulate you for conducting the hearing.

WHITFIELD: Well, Mr. Markey, I'd like to comment that there's been a lot of discussion today about the importance of passing this pretexting bill that was reported out of this committee I guess almost unanimously.

But I think the record also does reflect the existing California law and the Federal Wire Act and the FTC's civil penalties that it already is illegal. I think we can make a strong argument, that which is the point you were making.

And I would also just reiterate, as we close up with this panel, that we heard a lot of discussion about the board members being the subject of this investigation. But I don't think any of us want to forget that there were nine other people who were not board members -- they were members of the news media and other employees of the company -- that were also investigated.

And, Ms. Dunn, in closing: You've made it pretty clear today in your testimony that, as the chairman of the board and the board members came to you and urged that you conduct this investigation, and you turned it over to the management team, the investigative team, and we've heard a lot about the investigative team doing the daily work and making the decisions and setting the techniques and whatever and whatever.

I understand the team to be -- and I'm not trying to put words in your mouth, and you can correct me if I'm wrong -- but the team in your mind was Ann Baskins, Mr. Hunsaker, Mr. Gentilucci and who else?

DUNN: For the investigation that was conducted in 2006, the investigative team was headed by Mr. Hunsaker, reporting to Ms. Baskins. The only other names that I knew before today or recently were Mr. Gentilucci and Mr. DeLia. I don't know who else was on the team.

WHITFIELD: So from your perspective, when you talk about the investigative team, it's those four people?

DUNN: To my knowledge, yes. There may have been others.

WHITFIELD: OK. Now just one final point here. And we've gone over this a couple of times. But on Wednesday, February 22nd, 2006 -- it's in Tab 62 if you want to look at it; I think you've already looked at it -- but there was an e-mail from Kevin Hunsaker to you. And he talks about this electronic tracer and this e-mail that they wanted to send to the reporter for CNET. And I think her name is Dawn Kawamoto.

And it simply said: "H.P. has come up with a name for its next- generation data centers. Mark is meeting with the WSJ, and maybe others on the 22nd. Pull this from the presentation slides. Jacob."

So this is the Jacob that was a (inaudible) character and person who did not exist. And you've already said that the words you used in replying were not particularly good, and if you had to do it over again, you wouldn't say it, but you said, "I think this is very clever. But, as a matter of course, anything going outside H.P., I hope that we should have Mark's approval."

And then Kevin wrote back to you on the 23rd, the next day, saying: "For your information, I spoke to Mark a few minutes ago and he's fine with both the concept and the content. We will either send it out this afternoon or tomorrow morning, and I will keep you posted."

Is that your understanding of what happened?

DUNN: I think that reflects what happened, yes.

WHITFIELD: OK. And do you know if Mark Hurd knew about the tracer technology?

DUNN: I don't know firsthand. I think that's a question you'll have to ask him. I'm sorry. I'm not trying to be unresponsive, but it would be hearsay.

WHITFIELD: Oh, you said you've heard about hearsay on it? What hearsay?

DUNN: Oh, I've heard a lot of legal terms in the last...

WHITFIELD: But on this issue, have you heard?

DUNN: My understanding is a communication from Mark to the team, as reported by me, would be hearsay.

So I'm simply suggesting that he would be the better person to respond to your question.

WHITFIELD: But you don't have any other knowledge on this particular issue except for what's in this e-mail? You said "other than hearsay," which would indicate to me that you've heard additional information about whether or not Mr. Hurd knew about the tracer.

DUNN: What I know is reflected by what is in the e-mail. And in response to your question about how or what Mr. Hurd did, I am simply saying that that would be speculation on my part as to how he responded to the team.

WHITFIELD: Well, can you tell us what this hearsay is? Can you tell us?

DUNN: I assume that, since they did it, he gave his approval.

WHITFIELD: OK.

(UNKNOWN): Would you yield, Mr. Chairman?

WHITFIELD: Yes.

(UNKNOWN): Did you ever talk to Mr. Hurd about this?

DUNN: No, I did not.

(UNKNOWN): So you just heard second-hand that he had approved this?

DUNN: That's what I was just trying to say.

(UNKNOWN): You know, this is not a court of law, even though it might feel like one sometimes, though. You can testify to hearsay you may have heard.

DUNN: OK. Well, I'm trying to be responsive, I just don't want to put words in someone's mouth that I didn't hear.

(UNKNOWN): Sure. Now with that caveat, what did you hear?

DUNN: What I understood was that, since this action went forward, my assumption is that it was based on what the e-mails say, which is that he gave his approval.

(UNKNOWN): Thank you.

WHITFIELD: Well, that concludes our questions for this panel. And I want to thank you all for your patience. And this panel is now dismissed.

And I do want to, if there's not any objection, I'm going to enter into the record the two document books. And in addition to that, I would like to enter into the record the report by Larry Sonsini's firm -- his presentation made to the full board about this investigation, dated August 29th, 2006.

So without objection, we'll enter that into the record.

You all are dismissed. Thank you very much for being with us.

And at this time, we'll call the final witness of the day, and that's Mr. Mark Hurd.

WHITFIELD: Mr. Hurd, we welcome you to the committee today. And I...

HURD: Thank you. I can't see you.

WHITFIELD: ... barely see you, but I know you're there.

(LAUGHTER)

And we do appreciate very much your being with us today to shed additional light on this important matter.

And as you know, oversight investigation takes its testimony under oath. And I'm assuming that you have no objection to testifying under oath.

HURD: No.

WHITFIELD: So if you wouldn't mind standing and raising your right hand, I'll swear you in.

Do you solemnly swear that the testimony you're about to give is the truth, the whole truth and nothing but the truth?

HURD: I will.

WHITFIELD: Thank you.

You're now under oath. And under the rules of the committee and rules of the House you're certainly entitled to legal counsel. And if you do have legal counsel with you today and would like to introduce them, that would be great.

HURD: I have no personal legal counsel. I've got some company counsel but...

WHITFIELD: OK. Well, you're now sworn in, and we look forward to you testimony. And I recognize you for five minutes for your opening statement.

HURD: Thank you.

Mr. Chairman, members of the committee, thank you for the opportunity to appear before you today.

My name is Mark Hurd. I am with the Hewlett-Packard Company. I know that you've heard a lot of testimony. I know you have a lot of questions as a result. Before we do get to those, I would like to try to provide a larger context to what you've heard.

And what's really hardest for me to explain is this: H.P. is a company that has consistently earned recognition for our adherence to standards of ethics, privacy and corporate responsibility. And yet these practices that we've taken such pride in have recently been violated by people inside the company and by people outside the company whom we hired. This committee rightfully wonders what happened.

What began as a proper and serious inquiry of leaks to the press of sensitive company information became a rogue investigation that violated our own principles and values.

There's no excuse for this aberration. It happened. And it will never happen again.

Before I do anything else, I want to apologize to those whose privacy was infringed upon. This includes nine journalists and their families, two current H.P. employees, seven former or current H.P. board members and their families.

In varying degrees, these individuals were investigated through the use of pretexting, a technique used to obtain their telephone call information.

HURD: In addition to a heartfelt apology, I want those whose privacy was violated to know that we will soon provide to the victim the details regarding the information obtained about them, the means by which it was obtained and when it was obtained.

I also want to apologize to the employees of Hewlett-Packard who on a daily basis carry on their work with the highest integrity. They're the reasons H.P. has been recognized so often for their ethics.

This current mess in no way reflects upon the vast amount of our employees, their work or their reputation.

The question remains: How did such an abuse of privacy occur in a company renowned for its commitment to privacy? And it's an age-old story that the ends came to justify the means.

The investigation team became so focused on finding the source of the leak that they lost sight of the values of this company. They lost sight of the values that this company has always represented.

This company was built on integrity. If Bill Hewlett and Dave Packard were alive today they'd be appalled. They'd be embarrassed. And that's the way a great majority of the people in the company feel.

Members of the committee, I want you to know I'm not putting myself above the breakdown that has occurred. I wish I had asked more questions. There are signs which I wish I had caught. I'm responsible for the company, which means I'm responsible for fixing it and leading it forward through this hard time.

Our culture, our core -- which we call the H.P. way -- remains strong and ethical. But clearly changes are in order. Mistakes will happen, and these are very serious and unsettling ones that we've been discussing.

But what matters, ultimately, is how a company addresses the mistakes. H.P. has taken specific actions and will take further actions in the days and weeks ahead. We have accepted the resignation of our previous chairman and our general counsel. Other employees have left the company.

We've appointed a new lead independent director. We've appointed Bart Schwartz, the former head of Criminal Division of the U.S. Attorney's Office under Rudy Giuliani, to do an assessment of current practices and develop future best practices so that our processes will always be legal, ethical, appropriate and without peer.

We're putting into place new measures to maintain the highest levels of information privacy.

In summary, the big picture of what happened is we began an investigation of our board for leaks and have ended up investigating our investigation.

I pledge three things to the committee, to our employees, and to our shareholders and to those whose privacy was violated.

I pledge that I will dig harder and deeper and I will get to the bottom of this. I pledge that H.P. will take whatever steps necessary to make sure nothing like this ever happens again. And I pledge that this company will regain not just its reputation as a model citizen with the highest ethical standards, but we will regain our pride.

Thanks for the privilege of speaking today. And, Mr. Chairman, I'm happy to answer (inaudible) the committee.

WHITFIELD: Well, thank you, Mr. Hurd. And appreciate those comments.

After listening to the testimony of Mrs. Dunn all day today, you know, I come away from her testimony with the thought that she is a particularly strong individual, that she's quite focused. And from information I read about her, she's pretty meticulous.

WHITFIELD: And I'm sure she was determined to get to the source of the leaks out of the board and was successful in doing that.

But she also made it quite clear to us that, despite all sorts of evidence to the contrary -- there was all sorts of evidence that she knew about pretexting early on. And every time we raised that evidence with her, she said, "Well, I don't think that's accurate," or, "I don't recall that," or, "I've never seen that," or, "It was not mentioned to me," or whatever, whatever.

And she did consistently say, "I turned it over to the investigative team."

Now, in your mind -- I guess today it seems like this investigative team was the only thing going on at Hewlett-Packard. But I'm sure there were lots of things going on at Hewlett-Packard and maybe this was not even a priority at that time.

But from your perspective, who was the investigative team among employees at Hewlett-Packard that were responsible for this matter?

HURD: I understand, Mr. Chairman.

Let me do the best I can. And the context I'd like to provide you is that I started with the company in April of '05. So there's some time here that predates my arrival to the company.

Sometime in December '04, January '05, there were some of these leaks. And I've come to learn as I came to the company it created quite a bit of sensitivity around the board.

So there was an effort started roughly in that time frame -- and I think Mr. Sonsini talked to some of that -- to begin the process of trying to investigate those leaks.

There is really two phases, as I've come to understand it now, of this investigation.

The first phase, which you've heard referred to you as Kona I, really was an investigation that emanated from a private investigator who had a relationship with the board. Some of it actually emanated from the background check that the board did on the CEO, meaning me. And that continued on into Kona I.

That really did not have a lot of H.P. resource in the investigation as you might think about it.

In the second phase, which really started after the Palm Springs leak that occurred, that actually had a different team on it. So think of this as two separate teams.

At the conclusion of the Palm Springs meeting, Ms. Dunn asked me if she could use H.P. resource to pursue this leak, to which I said yes. That's where the second team came in place, where the new names you hear now would be Kevin Hunsaker and the team below Kevin.

So I know this sounds complicated, but there actually are two different groups...

WHITFIELD: But on Kona II, the names that she gave are the four names that you would...

HURD: Yes, sir.

WHITFIELD: ... identify also.

HURD: Mr. Chairman, that's right.

WHITFIELD: So you would be in agreement with her on that.

HURD: Yes, sir.

WHITFIELD: Now, was it your understanding that they did report -- and did they report to you or did they report to Ms. Dunn?

HURD: And this gets to the complexity of the governance of this. This is just not as straightforward as -- I know how much the committee would like to get it this way.

You have a chairman, you have a CEO -- and that's me. And the chairman clearly was appropriately pursuing these leaks.

The first set of resources really did not have anything to do with the company. That was contractors doing the work.

And the second one, clearly you had a reporting relationship where Kevin -- who you've heard -- Kevin Hunsaker reported in to Ann. But clearly, as you see the documents, there was a lot of communication going directly to the board.

WHITFIELD: And as we speak today, all of those people have resigned from the company, is that correct -- I mean, Ann and Kevin and Mr. Gentilucci?

HURD: Correct.

WHITFIELD: So those three have resigned.

HURD: Correct.

WHITFIELD: And then Ms. Dunn has resigned from the board.

HURD: Correct.

WHITFIELD: OK. So that's a total of four. And that's where it stands right now -- my understanding.

Now, there's been also a lot of discussion today about this e- mail sent by a character who did not exist named Jacob. And that was sent to a reporter for CNET.

And you probably heard this, that Kevin had sent an e-mail to Ms. Dunn saying that, "We want to do this," and, "Here is what it is," and, "Mark Hurd's going to be meeting with the Wall Street Journal," and, "If she gets this, then we think we can trace who's doing the leaking."

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WHITFIELD: And she said, "It's very clever on your part to come up with that idea," and, "Somebody needs to run it by Mark Hurd before we do it."

And then Hunsaker wrote back and e-mailed and said, "Well, I talked to him about it" -- and I think this is in exhibit 52 if you want to look at it in particular -- but he basically says, "I'll run it by Mark," and the content and concepts is fine with him.

And I would just ask you, do you remember having the discussion with him about that?

HURD: I can tell you what I remember and also what I've learned, and so I'll try to bring the two together.

I clearly remember the effort on the part of the team to try to get some sort of approval on the content of the e-mail. And I think their views was that if there was going to be information put out into the market for whatever reason, it needed to be agreed to.

To the best of my memory and to my knowledge, I remember nothing about spyware or any of the other terms that have been discussed as it related to the e-mail. But I do remember a discussion about the content, yes.

WHITFIELD: You're testifying today that as far as the details of the mechanics of the way these things worked and their real purpose, you're not really familiar with that?

HURD: To the best of my knowledge, best of my memory, I do not remember a discussion about that type of methodology.

WHITFIELD: Now, I know that some time in March, March 10th, I guess Mr. Hunsaker prepared a report about this entire investigation -- tab 72 -- and in that report he did a pretty thorough job of everything that was going on in this investigation. And he sent it to Patty Dunn, Mark Hurd and Ann Baskins. And in there he talked specifically about pretexting, and this is after it's already been -- they've already utilized pretexting for their information.

But it's my understanding that you really never read this report, is that correct?

HURD: That's correct.

WHITFIELD: Were you able to...

HURD: Not my finest hour, Mr. Chairman.

WHITFIELD: Yes.

But was there any reason, particularly, that you didn't read it or was it other pressing matters?

HURD: I want to make sure I'm clear: I am accountable for everything that's sent to me, and I should be reading it.

I pick my spots where I dive for details. This was not a place that was a priority for me.

WHITFIELD: Right.

HURD: It was the day of our shareholder meeting. And, again, I want to make sure I'm clear...

WHITFIELD: Right.

HURD: ... there's no excuse...

(CROSSTALK)

WHITFIELD: Right, right.

HURD: If I'd read it, I might have picked it up.

WHITFIELD: From your viewpoint, how significant were these board leaks? As the CEO of the company, was it something that really did -- did it really disturb you or...

HURD: It did not -- I would say, because I didn't have the history, Mr. Chairman -- I did not have the history of the December- January time frame. And during my time as CEO, we were not encountering a significant number of leaks. So I was probably not as concerned as some.

WHITFIELD: OK.

I'm not here to defend you in any way, but I will say that as a member of Congress, representing 650,000 people, there are a significant number of reports and letters that I do not have the -- that I do not read for one reason or the other. I'm not defending you but -- because I do think that the way that this issue has come out was certainly much different than anyone intended at H.P. I'm quite confident of that. And it has tarnished the reputation of the company. And I think it certainly violated the standards of conduct of the company.

At this time I recognize Ms. DeGette for 10 minutes.

DEGETTE: Thank you, Mr. Chairman.

Mr. Hurd, did you have the opportunity to hear the testimony of the previous panel?

HURD: I heard some.

DEGETTE: OK.

Now, in early January, that was the first you heard about this investigation of board members and the leaks, correct?

HURD: Just to be clear, early January of '06?

DEGETTE: Yes.

HURD: No.

DEGETTE: OK.

HURD: I would say that when I first came to the company, there was discussions about the leaks.

HURD: I can't give you specifics in that April-May time frame the first few weeks I was there. But in July, as I was leaving town, there was a meeting that was designed to talk about leaks.

DEGETTE: But in January, that's when Ms. Dunn came to you and she said, "We're continuing the investigation. Can we use the internal resources?" right?

HURD: Correct.

DEGETTE: And you said OK.

After that, what did you know about the ongoing investigation? Did you know about the searches of the trash?

HURD: No.

DEGETTE: Did you know about the monitoring of H.P. employees -- I'm sorry -- of board members and their families?

HURD: No.

DEGETTE: Did you know about the monitoring of reporters?

HURD: No.

DEGETTE: No one ever told you about any of this?

HURD: No...

(CROSSTALK)

DEGETTE: And did you know about the pretexting that was going on?

HURD: No.

DEGETTE: You didn't know about the whole Jacob incident?

HURD: No, no.

Let me go back just to my previous testimony, because we go through these. To the best of my knowledge, I do not remember any of those first points that you brought up.

DEGETTE: OK.

HURD: The issue about the e-mail, I definitely knew about the content of the e-mail that was going out. There was clearly a communication...

DEGETTE: Did you know about the fake person, Jacob?

HURD: Yes. I knew about the objective...

(CROSSTALK)

DEGETTE: What was your view of that?

HURD: Well, hindsight's...

DEGETTE: Do you think that seemed ethical for the investigators to be coming up with a fake individual to be e-mailing reporters?

HURD: Let me try to tell you what was going through my head at the time.

I certainly was trying to -- this was a team that was...

DEGETTE: I only have 10 minutes. I'm really sorry. Yes or no?

HURD: At the time, I agreed with the content of the e-mail.

DEGETTE: So you thought that was just fine...

HURD: It was appropriate to find the leak.

DEGETTE: ... to be having fake people e-mailing reporters?

Do you think that today?

HURD: With the benefit of hindsight, I wouldn't do it again.

DEGETTE: Did you hear when I asked Mr. Sonsini of all of these techniques, some of them, though they may be legal, are ethical for a major corporation like Hewlett-Packard?

HURD: I agree with you.

DEGETTE: So you agree none of these are ethical?

HURD: I agree there's a difference between legal and ethical.

DEGETTE: Do you think that H.P. should have been using techniques like that...

HURD: No.

DEGETTE: ... to investigate leaks? No?

HURD: No.

DEGETTE: Thank you.

Now, you said that a lot of things broke down here and that you're trying to fix that. So I, kind of, want to go through where the breakdown was.

The first thing is that we have heard that it is very unusual to have a non-executive board chair, is that correct?

HURD: I wouldn't call it "unusual," but it's not common practice...

DEGETTE: But Ms. Dunn says it's not done very often, and because that she was not a paid -- like a CEO, she had no real responsibility to oversee what was under her in terms of the investigation. Do you agree with that?

HURD: I...

DEGETTE: I mean, do you think it's because of the structure, that she was the chairman without -- just being an independent chairman?

HURD: I believe it is not as simple a governance model...

DEGETTE: Don't you think that the chairman of the board should have the same ethical obligations whether or not she's an employee of the company?

HURD: There's no question about that.

DEGETTE: OK.

So that's not really -- I mean, just that structural function, that's not why there was a breakdown, right?

HURD: I agree that there's no difference in ethical behavior no matter whether you're a non-exec chair, a chair, CEO at any level in the company.

DEGETTE: And I suppose you would also agree that the chairman of the board would have an ethical obligation, if she saw unethical things happening in an investigation of her own board member, she would mention it to someone like, say, the CEO, correct?

HURD: Certainly.

DEGETTE: Did she ever mention it to you?

HURD: No.

DEGETTE: OK, take a look at tab 29. This is the initial briefing slide show we've been talking about with Ms. Dunn.

HURD: Let me catch up to you. Let me catch up.

DEGETTE: Yes.

HURD: OK, I'm with you.

DEGETTE: Have you ever seen that document?

HURD: I have now.

DEGETTE: OK, had you seen it at the time? Were ever given it?

HURD: Not at the time. This is basically the draft.

DEGETTE: That's correct.

HURD: No, I'm sorry, I'm sorry, I'm sorry, let me back up. No, I had not seen this document.

DEGETTE: OK, this is the one that talks about pre-trash inspection and so on.

HURD: No.

DEGETTE: No one ever gave you that.

HURD: To the best of my memory, I never saw this document.

DEGETTE: That's the first red flag. Take a look at tab 60. Wait, wait, I'm sorry, I'm sorry, I'm getting ahead of myself.

HURD: I know you're ahead of me.

DEGETTE: Tab 30.

HURD: Thirty.

DEGETTE: Right.

HURD: OK, I'm with you.

DEGETTE: This is the senior management briefing on Project Kona 2 that we were also talking about earlier.

It's a very similar briefing, talks about some of the same techniques.

Were you ever given that?

HURD: No, to the best of my knowledge, I didn't see this.

DEGETTE: Even though it's a senior management briefing, you never saw that.

HURD: To the best of my memory.

DEGETTE: Red flag number two. Now, take a look at tab 60.

HURD: OK.

DEGETTE: OK, this is the e-mail communications between Ann Baskins and various people about the Jacob situation.

HURD: Right.

DEGETTE: And you have to start from the second page and go off, where -- and part of that was -- did you hear me when I was talking to Ms. Dunn about how she had said that they had to have your approval of this?

HURD: Yes.

DEGETTE: OK, and did anybody come to you for approval of this?

HURD: This would be the first that I would have seen of it, that said, "Hi, Mark," the e-mail that says 2-22.

DEGETTE: OK, did you see the whole e-mail exchange?

HURD: No, not until I would have seen this 2-22. Do you want me -- are you wanting me to...

DEGETTE: What I'm saying is on 2-22, when you saw the "Hi, Mark" e-mail, the other e-mails that say, "Hi, Ann and Patty," and the rest, you would have seen those, because they would have been attached to the e-mail exchange, correct?

HURD: Can I just read them for one second?

DEGETTE: You bet.

HURD: I don't remember seeing the string, but I agree that I possibly could have.

DEGETTE: And at that time, you didn't see anything wrong, as you had testified earlier, with this whole Jacob situation.

HURD: I definitely remember the content, Congresswoman. I do remember it and I agreed with the content.

DEGETTE: Now, take a look at tab 72. You're there?

HURD: Yes.

DEGETTE: OK, now, I think this is the document that the chairman was just talking to you about, the draft of the investigation report, which you said that you, frankly, didn't read because it was the day of your shareholders meeting and it was a mistake, right?

HURD: Correct.

DEGETTE: Now, here's my question to you. Didn't you think that leaks at the board level were a very serious problem for the company?

HURD: You know, I...

DEGETTE: Because Ms. Dunn certainly did.

HURD: I know she did and I do appreciate that concern and I do not -- I am not a supporter of leaks in any way, shape or form.

I will tell you, though, and I don't mean this in -- in terms of the priorities of the Hewlett-Packard Corporation at the point in time, this was not the CEO's number one priority.

DEGETTE: OK, the reason I just showed you all these documents, and there are more, is because you had testified earlier that the rules broke down. I see all of these as red flags in the organization that were never caught by anybody at the CEO level on down.

And I'm wondering if you can tell me how on earth we had such a huge breakdown. You've been in corporate America for a long time.

HURD: Yes, ma'am.

DEGETTE: Number one, have you ever seen an investigation of corporate board members that involved these kinds of tactics that were involved here?

HURD: Congresswoman, I've seen a lot of stuff in my career.

DEGETTE: So your answer would be yes?

HURD: No, I think I've probably never seen anything like this. And there's two reasons, there's two ways processes break down. They break down because of bad processes that don't have checks and balances and they break down because of poor execution.

Those are the two ways. We broke down here in both.

DEGETTE: OK, my question, though, is you broke down in both, but there were red flags aplenty. Why was it that nobody in senior management at Hewlett-Packard caught any of these red flags?

HURD: I'll speak for myself. I didn't catch them.

DEGETTE: Why?

HURD: Some of it was attention to detail, as you described. And there's another piece of it that I would tell you, from a checks and balances perspective, in a company of our scale, we have a 151,000 employees, we're kind of a small city, almost, and have all the issues that go in that size of an institution.

The CEO cannot be the backstop for every process in the company. The processes have to be pushed into the organization, with clear checks and balances and clear accountability. We broke down in both.

DEGETTE: Mr. Chairman, I would just ask unanimous consent if Mr. Hurd would be willing to supplement his answer once the internal audit is completed, to let us know what internal checks and balances had been in place, because, frankly, this was a breakdown not just at the CEO level, but at every level of the legal department and senior management.

WHITFIELD: Thank you.

Mr. Walden, you're recognized for 10 minutes.

WALDEN: Thank you, Mr. Chairman.

Welcome, Mr. Hurd.

HURD: Thank you.

WALDEN: When Ms. DeGette showed you Exhibit 60, I think I heard you say that it was February 22 was the first time you heard of the e- mail sting operation. Isn't that right? That was at tab 60.

Your testimony a few minutes ago was that that...

HURD: The first that I remember, Congressman.

WALDEN: It was the 22nd of February. Could you turn to tab 52?

In an e-mail from Patty Dunn to Ann Baskins and Kevin Hunsaker, with the subject line of "Kona," sent February 9, she says, and I quote, "I spoke with Mark and he is on board with the plan to use the info on new handheld leader. He also agrees we should consider doing something with the adaptive enterprise branding issue, given there's some chance D.K. will seek clarification on this from her CNET source. Regards, Patty."

Are you the Mark in that e-mail?

HURD: Yes, I am.

WALDEN: Does this refer to the Jacob e-mail?

HURD: No, two separate subjects. Well, it may have been using the same name, Jacob, but they were two separate content subjects. One was the next generation data center, the first was the handheld person in the organization, who would be brought out.

WALDEN: But does this relate to the e-mail that would go to the reporter with false information?

HURD: I'm not real -- Congressman, I want to make sure I'm clear with you. I can't give you the detail of how the delivery -- what was combined, what was not combined, and what the methodology was. But I do remember this content, yes.

WALDEN: So this was talking about what would go to D.K., who is the reporter.

HURD: One of the two subjects that would go potentially to a reporter.

WALDEN: I guess the point is you've told us February 22 was the first time you were aware of this e-mail and, actually, this is a February 9 e-mail to you or about a conversation with you.

HURD: I was trying to divide the two subjects, but I accept your point.

WALDEN: So you probably knew before February 22.

HURD: It was sent February 9. There's discussion about the handheld, yes.

WALDEN: You undoubtedly heard the testimony by Ms. Dunn, who took no blame for this. I mean, she was asked very clearly by my colleague, Mr. Stearns, do you accept any culpability, any blame, she said no and basically pushed it off on Ann Baskins, as legal counsel, or others in the management side.

If she had no blame and it was Ann -- do you think it was Ann Baskins' fault, then? Was she in charge?

HURD: Congressman, I want to make sure I'm clear with you. I'm in charge of the company.

WALDEN: So it wasn't Ann Baskins.

HURD: We had breakdowns at multiple levels in the company. I am responsible for H.P. Patty was the chairman. Responsibility goes across the entire company, Congressman.

WALDEN: All right.

HURD: Including myself.

WALDEN: So why did Ms. Dunn resign?

HURD: Ms. Dunn resigned after deliberations from the board and the board decided to change the leadership of the board.

WALDEN: They asked for her resignation.

HURD: Yes, sir.

WALDEN: Why, if she wasn't to blame?

HURD: Well, I'm back to board deliberations, Congressman, and I think there was a combination of effects, some of which was a concern about the ability to lead the company going forward, lead the board going forward, given what had transpired.

WALDEN: In the Sonsini interview with Ron Delia on Kona 1, which is tab -- we'll get you the number here, sir -- 115, on item number 8.

HURD: I've got to go to another book.

WALDEN: I understand.

HURD: Sorry for that.

WALDEN: No, we appreciate the willingness of you all to make all these documents available.

On number 8, it says, "Delia recalls a specific meeting in Palo Alto in July of 2005, at which he met with Dunn and Baskins, Mark Hurd, Jim Fairbaugh, Kevin Huska and Tony Gentilucci, regarding the investigation. When Delia arrived at the meeting, Baskins, Gentilucci, Fairbaugh, Huska were already in the meeting. When Delia arrived, Hurd was not in the meeting. He appears to have stepped out temporarily, but he stepped back in a few minutes later. Delia did not recall whether Hurd was present for any discussion of phone records."

Do you recall if you were there for a discussion of those phone records?

HURD: No, but I remember the meeting. It was the day of a board meeting. The board meeting was either still going on or ending. I was relocating -- I know you've got a limited amount of time, I just want to make sure I clear up things.

WALDEN: I understand.

HURD: I was relocating back home. Actually, I was going back home, because I was still living in Ohio, and I had to leave early, got there late, and that's what happened.

WALDEN: But you don't remember any discussion then about methodology.

HURD: I really don't. Clearly, the focus in the meeting, for the limited time I'm in here, was that they had not figured out who the leak was.

WALDEN: OK, and that was on Kona 1.

HURD: That was Kona 1.

WALDEN: So then we go on to Kona 2.

HURD: Yes, sir.

WALDEN: And, again, you heard this. I'm just trying to sort out who made the decision that allowed this to go forward, because we all sort of thought Ms. Dunn did, but I didn't get the impression she thought she did and then she sort of said you did it.

HURD: Let me make sure I'm very clear with you. This was a leak at the board level. Patty took it very seriously, and, by the way, let me add, appropriately, appropriately. She came to me and asked to be able to use H.P. resource, which came into the legal department, which is where the name Ann Baskins comes in.

Patty then was the business owner, I would describe it, of all of that, using H.P. resource to go execute.

WALDEN: And I guess what I was troubled about was we have a lot of e-mail traffic back and forth to the investigators from her on pretty specific levels, and yet when we asked her about her involvement, it seemed to be it was at a 30,000 foot level and, yet, she's naming the name of the investigation, she's providing phone numbers.

There are other e-mails from people saying she wants very specific things in the report, techniques, resources, but she doesn't have any recollection of any of that.

Do you see why we're troubled by what we're hearing?

HURD: I can understand why you're troubled by the whole thing. I understand, Congressman.

WALDEN: And did you ever think that there'd be -- when I asked about access to public -- that she thought you could just get somebody's phone records through public means, did you believe that that was possible, that I could just somehow...

HURD: I'd be speculating. I'm just not an expert in this area. I've come to learn a lot and I'm very...

WALDEN: I mean, come on, did you ever think you could just pick up a phone somehow and get my phone records or I could get yours?

HURD: Congressman, it wasn't something I thought about and, I'm sorry, I just can't give you a comment on that.

WALDEN: I can't imagine that would be legal or appropriate. Would you think it's appropriate?

HURD: I would not want somebody, without my permission, to have my cell phone bill.

WALDEN: Well, your cell phone records.

HURD: Cell phone records. Well, let me be clear. Cell phone records or cell phone bill, I wasn't trying to be cute with my answer.

WALDEN: If you could turn to exhibit 77, this e-mail states that Tom Perkins called you before the March 2006 board meeting and asked you about the status of the investigation.

Do you recall that conversation with Mr. Perkins? And I'll let you get caught up there, sir.

HURD: A quick second.

WALDEN: Seventy-seven.

HURD: Seventy-seven, I have a different -- I have something that's Kevin Hunsaker to Tony Gentilucci under 77.

WALDEN: Right. And it says, on the second paragraph, "It's also worth noting that a few days before the March 2006 board meeting, Perkins called Mark Hurd and asked him, among other things, about the status of the investigation and the leaks. Hurd told Perkins the investigation team had assembled a significant amount of circumstantial evidence, but that he was not sure where it would ultimately lead."

Do you recall that conversation?

HURD: No.

WALDEN: Is that accurate? OK, because according to this e-mail, you apparently knew enough to tell Mr. Perkins what evidence the investigation had uncovered. But are you saying...

HURD: Well, now, remember, just timing-wise, that this e-mail would be post when I knew the answer.

WALDEN: Right.

HURD: So if we went back to the meeting in Los Angeles, where I received here's the answer and that meeting really reflected on here's your leaker, at roughly this timeframe. It would be logical that I would have known where the leak was coming from.

WALDEN: And would you have ever asked how they got that information?

HURD: Again, I want to make sure I'm clear with you, because I know it's -- I should have. I should have.

WALDEN: I guess the thing we're struggling with, obviously, is the bigger public policy about pretexting, you know, but also about, in a corporate environment, we haven't been able to figure out who should have asked this question and didn't.

And there are a lot of people who show up that knew about it and other -- you know, Mr. Adler and Mr. Nye and a few of them said, "Wait a minute, this isn't right."

HURD: Congressman, first of all, I appreciate exactly what you're saying. We have got to push this accountability further down in the company, but I don't want to stop. I should have been able to catch it. I didn't.

WALDEN: I understand. Thank you.

WHITFIELD: The gentleman's time has expired.

Mr. Inslee, you're recognized for 10 minutes.

INSLEE: Thank you.

One thing I want to second, you talked about when checks and balances break down, things really go awry. And working in the federal government, I want to tell you that I can empathize with that.

HURD: Congressman, I'm glad I am where I am most of the time, maybe not today.

INSLEE: You know, there's been a lot of bright days for H.P. and you've done some great work for our economy and people in general and there's going to be a lot of other bright days. This is not one of them, of course, not your finest day of this great organization.

And when organizations go awry, like I think happened here, sometimes it makes sense to do a little penance and help the cause out, to try to see to it that we reduce this from happening again in our community.

Now, the satiation here in Congress is this committee, as you've heard, has passed a bill to give the federal government tools to prevent illicit pretexting that you've run afoul of, your organization's run afoul of, and we can't get the speaker of the House to schedule a vote on this bill.

I think it might be helpful if you called the speaker of the House this afternoon and suggest to him that he schedule this bill, since you've learned that this is not a real positive thing for American corporations or the economy and privacy in general.

What do you think of that idea?

HURD: Do you think he'd take my call?

INSLEE: You bet he'd take your call and he should take your call, because you're the leader of a major corporation. It's a major technology leader.

And I'm very serious about this. We need to send a message to the country that we're going to stop this from happening.

HURD: Congressman, we're -- I don't want to be trite with my comment. We are out in support of making pretexting illegal, creating clarity.

And I don't want to hide behind the lack of clarity, either, because there's a difference between legality and ethical behavior and we don't want to confuse the two.

We have a standard of business conduct that this violated regardless of any clarity around the legal issues.

But I understand your point and we're going to take efforts to support the legislation.

INSLEE: I really do believe that could be helpful.

HURD: You have our support.

INSLEE: And I appreciate that.

I wanted to ask you about the tracing technology and its use by H.P. and what your current corporate policy is.

Mr. Adler suggested that this had been used in other contexts, as I understand his testimony, that it's been used in this context of trying to track down a leak of board members, but, also, had been used by H.P. targeting other non-H.P. personnel on occasion.

Are you familiar with what other occasions that has been?

HURD: I believe that what Mr. Adler was describing about the use of it in other projects, we are currently going through a process right now to go directly at why we use technology like that.

And I'm not intimate with that technology, several others I am. I'm not sure, as we go into the future, we will be comfortable with the use of technology like that. It's in the process we're going to review and one of the reasons I mentioned in my statement, our hiring of Bart Schwartz, is to go through the process to make sure, in every investigation, we are behaving properly and appropriately as we go forward.

So we will put lots of energy into this, Congressman.

INSLEE: Are you familiar whether or not H.P. has used this technology against other non-H.P. targets?

HURD: This being tracer technology?

INSLEE: Yes.

HURD: Congressman, I have no evidence of that. I have no knowledge of us using it against a competitor or in any improper way. I have no knowledge of that. But as I said earlier, we're going to dig until we're at the bottom of everything.

INSLEE: Speaking for the 600,000 people I represent, I think their expectations of privacy is that corporations would not use tracer technology to try to follow where they send e-mail or where they send attachments, to report back to that corporation, without their specific approval.

That's the expectation that my constituents have. Do you believe that H.P. should follow, and major corporations or minor corporations, should follow that privacy expectation?

HURD: I think that for us at H.P., it's not important for us to follow, but to lead, and it's important for us to be a leader and we have been a leader in consumer privacy. We are a leader in consumer privacy.

This is an aberration to us. We need to make sure we're checking every process not just with our customers, but internally, whether it's an investigation, use on our own people, in any, way, shape or form, to making sure we're appropriately dealing with things, which we will do, Congressman.

INSLEE: Well, I hope you do so and I hope that includes helping in Congress to move forward on privacy legislation.

I think this is hearing is peeling back the layer of an onion that's very disturbing and that we need to do more work on privacy here in Congress, and I hope that you'll put your corporate resources behind efforts in that regard so that others do not fall victim to this.

I don't believe this should be left just to the whims of the CEO of these particular corporations. We need total clarity of this situation so that no others have to depend on the good graces of whatever management we have.

And I just hope that you'll lend your weight to that effort and become a leader on this.

HURD: Congressman, we actually believe we have been a leader and that's what's so disappointing about this. We actually believe we've been a leader, to point out where consumer privacy should be and should go.

We've got many people in the company that all they do is focus on privacy around our products, our solutions. It makes this even a bigger disappointment.

INSLEE: I appreciate what you're saying, but I'm just suggesting that -- and that is a good statement, but H.P.'s actually leading legislative efforts to try to solve this problem is the next step that I would encourage you to consider.

HURD: I couldn't agree with you more. We want to be that leader, Congressman.

INSLEE: Thank you.

HURD: Thank you.

WHITFIELD: Ms. Blackburn of Tennessee is recognized for 10 minutes.

BLACKBURN: Thank you, Mr. Chairman. And I want to thank our witness for being here with us.

I will tell you, quite frankly, listening to all of this today and spending yesterday going back through all the evidence, looking at the chain of e-mails, looking at the memos, it certainly provides a basis to us to believe that there were some folks at H.P. that certainly knew that they were pushing the envelope and they were skirting the edges.

So I've got a few simple questions and then I'm going to yield my time back.

But, Mr. Hurd, I want to know if you can tell me when was the first time you ever heard the term "pretexting."

HURD: To the best of my memory, it was in a memo or an e-mail that went from Larry Sonsini to Tom Perkins, that was in the -- I'm going to say in the summer and it's in your documents.

BLACKBURN: Yes, it's number 91.

HURD: Thank you.

BLACKBURN: We know these now. We're very familiar with this legislation.

HURD: You're ahead of me.

BLACKBURN: So this is the June 28, '06 memo.

HURD: Yes.

BLACKBURN: And this was the first time you ever heard the term "pretexting." Who did you turn to to define the action of pretexting for you?

HURD: What transpired, if you want this background.

BLACKBURN: Yes, please.

HURD: Is that this resulted in a series of e-mails back and forth that are in your documents, where eventually not only did we uncover the term "pretexting," but what surfaced within the next three weeks or so was a letter from a phone company that not only described the term "pretexting," but described actually what happened.

That trigger was the first specific trigger I had that this was wrong.

BLACKBURN: So you were this far into the Kona project and the JACOB project and you didn't realize what pretexting was.

And you had never, through this entire process, turned to somebody and said, "Tell me what this word pretexting is. I didn't have that in vocabulary when I was in fifth grade or at Baylor University, when I was in freshman English."

HURD: I don't remember it in freshman English, nor do I remember hearing it after.

BLACKBURN: So you would never have heard it. I'm trying to figure out who you would have turned to and whose advice you would have asked to define the term and the action to know what this really was.

And, Mr. Hurd, the reason I'm doing this is not to be flippant with you, because I think we live in this world where e-commerce is very much a part of our day and technology very much a part of our day.

Being certain that the statutes and the rules under which business operates each and every day and being certain that the leaders in the field, all the stakeholders understand is tremendously important to us.

So that is why I had that question.

Now, let me ask you this, also. There seems to be disagreement between Ms. Dunn and you as to who actually said, "The buck stops with me and I'm making the decision."

HURD: I will speak for no one else, that in Hewlett-Packard, operations and strategy and everything else that goes on in H.P., eventually, the buck stops with me.

BLACKBURN: So you're the one responsible for ordering the investigation and the spyware technology, the tracer, if you will.

HURD: No, I didn't do that. But that said, that said, in the end, I am responsible for everything that goes on at H.P.

BLACKBURN: All right. Who actually made the decision to put the tracer on the e-mail?

HURD: Well, I'm sure it -- I'm going to tell you what I think. My belief is the investigative team had a set of processes that they used. They were trying to their best to fulfill the objectives that the chairman had set forward and that's what they did. They went and executed around that.

BLACKBURN: And who's running H.P.'s investigative team as of right now today?

HURD: As of now, we have an open position.

BLACKBURN: An open position.

HURD: We are looking for qualified candidates, Congresswoman.

BLACKBURN: Sir, I have no doubt you are.

Is H.P. investigating or using spyware on or pretexting anyone, either an employee, a competitor or a board member, today and at this time?

HURD: I have sent out very clear instructions that any activity that you have described of the specifics of pretexting is to be ceased and if anyone is confused, they can call my extension.

BLACKBURN: And does that apply to spyware technology, also?

HURD: The spyware technology, I only put the caveat on it, as Fred described, there are a couple of dimensions to the use of this technology.

BLACKBURN: Right.

HURD: I'm going to go back directly and make sure I look specifically at every use of that kind of, I think as he recalled it, send-receive technology, and make sure that we have absolute clarity.

BLACKBURN: So people that you were running pretexting work or people that you were running tracers through their correspondence, you have ceased that at this point in time.

HURD: There is no -- repeat this question one more time, Congresswoman, just to make sure I've got it right.

BLACKBURN: Did you stop offending? Did you stop the tracer technology, the spyware technology, the pretexting?

HURD: We are stopping anything that isn't appropriate or ethical in the company. We're looking through it right now. That's why we've got an investigation going on through the company. It's still not complete.

BLACKBURN: OK, great. The Kona project briefing that has been referred to by my colleagues a couple of times, who actually prepared that?

HURD: I'm sorry. Which Kona briefing, Kona 1, 2? There are multiple of the briefings.

BLACKBURN: There's two. Who prepared them?

HURD: It would have been the investigative team. But the Kona 1 -- let's go back with it. The Kona 1 briefing, that was the one at the conclusion of it, I believe would have [audio gap].

BLACKBURN: ... that we have in our documents.

HURD: There are two sets of contractors. There's a subcontractor and I think there actually are a series of subcontractors to that subcontractor that we actually would not have an agreement with, that would have the agreement with the original subcontractor that has been terminated.

I believe that the subcontractor in question had been working with Hewlett-Packard for roughly, roughly, eight years.

BLACKBURN: Eight years.

HURD: Roughly.

BLACKBURN: Well, Mr. Chairman, I'm going to yield back. Thank you.

WHITFIELD: Thank you, Ms. Blackburn.

At this time, I recognizes Ms. Eshoo for 10 minutes.

ESHOO: Thank you, Mr. Chairman, and good afternoon.

WHITFIELD: Ms. Eshoo, excuse me. Mr. Burgess has not asked his questions. He's a member of the subcommittee. So we'll come back to you.

ESHOO: Absolutely. I'll wait.

WHITFIELD: Dr. Burgess? You want to yield? He yields to you. He's such a polite fellow.

ESHOO: Thank you.

Well, it's been a long day and I think that you have the advantage of being last, because everyone is somewhat exhausted. But nonetheless, there are still, I think, some questions to be asked.

Let me just comment first that -- and I've said this with each group that has come in. For me, this is a sad day. I think it is for you, as well.

I keep thinking of the thousands of employees who no doubt have tried to access this at some point during the day on C-SPAN. So many of them are my constituents. They have worked hard to not only help to make the company successful, they have a real investment in it, a great sense of pride, and I share that with them and I think that you do, as well.

This really needs to be cleared up. I don't think there can be anything that's lingering at the end of this and I hope that there isn't, because it's something that needs to be -- you know, the sunshine is really disinfectant, I believe.

One of our members, the distinguished ranking member of the full committee uses that a great deal, and that's what this process is about.

You're one of the survivors of the key people in this, very distinguished general counsel is gone, distinguished chairwoman of the board gone, Mr. Hunsaker, the ethics officer of the company, gone, Mr. Gentilucci, I can't remember his exactly title, you know what it is, gone.

And so I think with the individuals that are, even though Ms. Dunn did testify during the longest stretch of today's hearing, there are gaps. There's still a lot of gaps.

Now, I asked Mr. Adler, whom, I don't know, either couldn't hear me or hasn't worked at H.P. long enough to have an institutional history of how H.P. is operated. So let me start with the questions that I asked him.

How long has H.P. had a contractor or retainer or retained SOS, ARG (ph) and the other outfit, Eye in the Sky, I think is the name of it?

HURD: The contract relationship, as I mentioned, I think was roughly around eight years.

ESHOO: Eight years.

HURD: Was the term of that contract.

ESHOO: And mostly with SOS or all three?

HURD: That's my understanding.

ESHOO: That's your understanding. Do you still have a contract with them?

HURD: No.

ESHOO: Are they still on retainer?

HURD: No.

ESHOO: No. Are you going to hire any outside or contract with outside investigators? You're answer is probably going to be no, given this experience.

HURD: Well, I think what we're going to do, as I mentioned, is we're going to go get the best in class processes, Congresswoman, to make sure that we understand exactly how investigations, if they need to be done, are done, so they meet the letter of our ethical standard, as well as our...

ESHOO: What did they do for eight years?

HURD: I don't know, Congresswoman. They did many investigations over that period of time.

ESHOO: In reading the background and preparing for this hearing, one of the breakdowns was the use of Social Security numbers. That's a huge violation, I have to tell you, in my view, which really goes after someone's privacy.

You have a Social Security number, first of all, you're holding gold. You're holding gold. Someone filed a fraudulent tax return in my name and it was because they somehow got my Social Security number.

So Social Security numbers are really the golden key that can open the door so that people can get a lot.

Can you explain to us, from your investigation of the investigation, how many Social Security numbers were used from inside the company to access information?

HURD: I do not yet have a complete report on how many. Clearly, there had been an effort to gather at least a couple that I've seen, which we're still not to the end of the trail.

So certainly there had been a couple and as I pledged to you earlier, we will dig tot the bottom of it.

ESHOO: Mr. Chairman, is that going to be requested as part of the record for this hearing?

WHITFIELD: Would you repeat that question?

ESHOO: I was asking Mr. Hurd about, no one brought this up today, but part of what I've read is that Social Security numbers were used internally in H.P. in order to, obviously, go out and secure information.

So Mr. Hurd doesn't know from the investigation into the investigation what the answer to my question is and I asked if that would be requested from the committee to be made part of the record. I think it's an important part of it.

WHITFIELD: Absolutely, without objection, yes.

ESHOO: Let me ask you this. Does the chair of the board have the authority to initiate activities and to commit company resources?

HURD: That's one of those issues of governance. I mean, you know, you get down to the fact that the chairman of the board certainly can commit company resources, depending on the interpretation of what resources are being committed.

ESHOO: Did Patty Dunn commit H.P. resources for this investigation?

HURD: The best thing I can tell you, Congresswoman, is about the second phase, being Kona-2, which is when I was in place. Patty did not. Patty asked me if she could now -- she could engage with H.P. resource, which...

ESHOO: So there isn't a firewall there. I mean, the way the description of the chair of the board, as it applies to H.P., seems to be just a little different. I mean, there are other models that are the same, but I think that there are others that are more common to one another than what was described today.

But when you said Patty took it seriously...

HURD: Yes.

ESHOO: ... I have to tell you that that sounded to me as if there was one person that took it seriously and went out on their own to do this.

And I have to tell you that from -- it's just the way it struck me.

HURD: Can I clarify it?

ESHOO: That Patty took it seriously.

HURD: Can I clarify that for you?

ESHOO: It seems to me that there were several members of your board that took it seriously.

HURD: If I said it that way, I mischaracterized it. This is a very serious issue. Leaks coming out of a company about strategy, about operations, is a very serious issue and I want to make sure I'm clear to everyone.

It's unacceptable. It's unacceptable to Hewlett-Packard. We can't have that kind of activity going on and run a company successfully.

So I want to say, one more time, Patty appropriately took it seriously. I was only trying to make a comment relative to the aggregation of priorities in the company relative to what's gone on across all of Hewlett-Packard.

It wasn't my personal number one priority relative to other things, but I don't take anything away to diminish from the importance of it.

ESHOO: To whom does the ethics officer report?

HURD: The ethics officer reports to our total customer experience group, which is in our marketing organization.

ESHOO: Are you going to change that?

HURD: We're going to look at the entire process, Congresswoman. That's what I pledged to you.

ESHOO: You know what I'm struck by? And I think that we're all somewhat guilty of this, but I'm certainly reminded of it over and over and over again today. It doesn't seem to me that human beings sit down and talk to each other anymore.

People are messaging and texting and we don't remember meetings and we're buzzing and we're wired and there's all of this information that's going out there. No one remembers it. It's not used for anything. And look what's happened.

I always want to look ahead, that we learn from the mistakes that we make. We're all human, it's a mark of our humanity. And my mother used to say, "You know, little people make little mistakes, big people make big mistakes," and there are big mistakes in this.

But I think when you reshape all of this, that given the earned reputation that H.P. has had, enjoyed, earned, that an ethics officer report to the CEO. It's just a suggestion of mine.

Where do the progress reports of the investigation go to? Are they shared? Do they just go to one person?

HURD: You're talking about on the go-forward basis, Congresswoman?

ESHOO: No, this, what you're here for today, the investigation. Where do the progress on this go to?

HURD: Where did they go?

ESHOO: Yes. I mean, there were the investigators, outside, inside.

HURD: Right.

ESHOO: They weren't just given instructions about what to do and then come up with a report. They must have had progress reports. Where did those progress reports go to?

HURD: I just want to make sure I'm clear. You're talking about the actual investigations themselves.

ESHOO: Kona 2.

HURD: There were some updates that went through the investigative team and I'm not aware of them escalating beyond that.

ESHOO: So it stayed in the same circle.

HURD: That's, to the best of my knowledge, what transpired.

WHITFIELD: The gentlelady's time has expired.

ESHOO: Thank you, Mr. Chairman.

WHITFIELD: Dr. Burgess, you're recognized for 11 minutes, for being such a great guy.

BURGESS: Thank you, Mr. Chairman. I yield to myself such time as I may consume.

Mr. Chairman, just for the record, we have heard a lot about our bill that we passed out of committee that has not been heard on the floor, but I do want to just draw the committee's attention to the fact that we did pass on the House floor H.R. 4709, the "Telephone Records and Privacy Protection Act."

That was a bill of Lamar Smith's out of the Judiciary Committee. Since it was out of the Judiciary Committee, it probably wasn't as good a bill as ours was, but I did want to point out that, indeed, the House has acted on this concept, trying to provide that context and that bright line that several people have asked for now.

I know the Senate has not done so and perhaps when the conference is held, we can actually conference both bills, with whatever the Senate produces for us.

Mr. Hurd, in your written testimony, you say that you don't recall seeing or approving the use of tracer technology. I guess of all the stuff we've heard, the tracer software or spyware, whatever it's called, is really the thing that's most disturbing to me.

And you state that you don't recall seeing or approving the use of the tracer technology. What was the purpose then? How did you think this elaborate structure around the e-mail of the fictitious Jacob, how was that all supposed to work?

HURD: So, first, you're correct, and that's the best of my knowledge. But, certainly, the objective of it was to get whoever it was that was leaking company information to call back into the company, to validate that whatever information in that e-mail was accurate.

BURGESS: OK, on, let's see, I think it is tab 62 in the big book, we have an e-mail exchange and, of course, I have trouble with e-mail exchanges. You always have to start at the end and then work up.

But, basically, the e-mail exchange gives the fake e-mail or the draft of the fake e-mail, it will be sent to Don and it seems like rather innocuous information. But, anyway, it goes right up the chain to you.

Now, it's your testimony then that you didn't know that the tracer software was going to be attached to this e-mail.

HURD: To the best of my memory, I don't remember that.

BURGESS: And I, of course, don't run a large electronics corporation. So, I mean, this information seems relatively innocuous. It's hard to see how the information itself would provide a traceable event for you, but that's your contention, that someone would call back in about the next generation data centers.

HURD: Oh, sure, that once that information was to get in the hands of whoever it was that was interested in leaking information, they would have to validate that the information was correct and talk to somebody who would be responsible for that.

I think that's what the team's objective was.

BURGESS: Well, it seems like everyone else on the team knew about the tracer aspect, but you did not.

HURD: I just don't remember it, Congressman.

BURGESS: OK, in a public statement last Friday, you stated that you attended meeting July 2005, where Kona 1 was discussed, where a verbal summary of the second phase of the investigation was provided.

The second phase of the operation being the tracer software or the fake e-mail?

HURD: OK, I think -- let's go back to the two investigations. What you describe, the two phases to it, the Kona 2 phase is where this e-mail actually occurs. Kona 1 was that first piece that actually didn't even use this investigative team. It was a separate team.

And that meeting you're describing, I believe, was a report out of their lack of a finding of any type in that meeting, where none of that I think was actually involved.

BURGESS: In the July meeting, were you present for the discussion of -- any discussion of phone records?

HURD: I don't remember a discussion about that, Congressman. I wasn't in that meeting all that long, as I commented earlier.

BURGESS: Let me ask you this. You attended the May 18, 2006 board meeting.

HURD: Yes.

BURGESS: When Mr. Perkins resigned.

HURD: Yes.

BURGESS: Mr. Perkins has been outspoken that he resigned in protest over the tactics that were used in the leak investigation.

Did the company insist, did you insist that the Form 8K filed by Hewlett-Packard announcing his resignation fully disclosed the reasons for his resignation?

HURD: Congressman, of course, we'd always want to file an 8K that was appropriate and was accurate and was complete. So that's my first response.

Secondly, I clearly remember Tom's reaction to what had transpired. He was bothered by the way the meeting occurred and the way the meeting was going on and he clearly made -- he made that very clear in his discussion as he departed.

Subsequent to Tom's departure, physical departure from the board meeting, he actually had a phone conversation with Mr. Sonsini, who you heard from earlier. I was not party to that phone conversation with Mr. Sonsini.

So the 8K itself reflects both what occurred in the meeting and the conclusions of the phone conversation between Mr. Perkins and Mr. Sonsini.

BURGESS: Do you think that's an adequate -- does that cover the explanation or is that an adequate explanation for exhibit 92 that Mr. Perkins wrote to the board? It seems, just from the tenor of his letter, that he's disturbed that there's not a complete disclosure of the activities that led to his resignation.

HURD: So, clearly, there is a debate, I accept your point. The 8K was filed based on the data that I described, the two pieces of data I described, what actually occurred in the board room and the follow-up conversation between the two.

To the best of my knowledge, Congressman, to the best of my knowledge, our 8K reflects both what happened in the board room, and for that one, Congressman, I was there. I was not at the conversation between Mr. Sonsini and Mr. Perkins.

So the combination of the two form our submission of the 8K. I understand the debate that occurred. Subsequent to the debate, you see here represented in the documents, Tom also asked that we look into this deeper into the investigative methods.

That debate was occurring, as you can see by the documents, into late July. We subsequently started the investigation, upon some of the evidence that was Tom was describing, which led to what's transpired.

So that's really how the flow worked, Congressman.

BURGESS: It's been a long day. Exhibit 96, in response to your company-wide e-mail on August 23 concerning the standards of business conduct, one of the Kona investigators, Vincent Nye, comments, and I quote, "This investigation will be a defining case which will test the company's claim of having uncompromising integrity," closed quote.

I think we'll both agree it's certainly done that. Do you feel that, going forward, you can restore Hewlett-Packard's integrity?

HURD: Congressman, I will.

BURGESS: What have you done through this process to keep the employees of your company informed of what has happened and what the progress of not just this hearing today, but your internal investigations at Hewlett-Packard, and what legal liabilities there may be?

HURD: Well, we've made an effort to communicate with them as often as possible. We've communicated with them about our changes in governance, the issues around the investigation.

I've been communicating to them frequently. I'll also communicate to them as soon as I return.

Our employees are great people, Congressman, and I'm not here to give you a commercial on H.P., but I believe this to my core. The people of Hewlett-Packard are some of the most hardworking, highest level of integrity of people around, and we're going to get this right.

BURGESS: I sincerely hope that you do. As I pointed out earlier, 57,000 American jobs, nearly 10,000 in my home state of Texas and almost 200 in the district that I represent in north Texas.

So it is personally important to me, as well, and I do sincerely hope you are correct.

Can you just answer me this in the five minutes or so that I have remaining? How do you feel that this affects the country's perception of corporate America? Have we harmed the corporate image, in general?

HURD: It's hard for me to imagine it's been helpful, but I can tell you this, that one of our founders, Dave Packard, said -- who is quoted quite a bit around corporate America and certainly around our company, "There'll never be a time that we don't make mistakes," and I'll guarantee you, Congressman, we'll make more.

The defining point will be what we do about them, how we handle them and how we redefine ourselves as we go forward in the future. And I promise you we are committed to our core to redefine our company in a way that not only we can be proud of, but that all of corporate America can be proud of.

BURGESS: Well, on behalf of your employees your stockholders, and the country at large, I sincerely hope you are correct.

Thank you very much for your attendance at this rather long hearing today.

Mr. Chairman, I'll yield back the balance of my time.

WHITFIELD: Thank you.

You know, today's hearing has focused, correctly so, in my view, on some significant shortcomings at Hewlett-Packard that did involve activity that violated the rights, privacy rights of individuals that possibly violated the law and certainly violated the ethics of Hewlett-Packard.

But in departing, there is one bright spot that I would like to just point out once again, and I'm sure you're familiar with this.

Back as far away as last February of 2006, Mr. Vince Nye, whom I've never met, wrote an e-mail, sent an e-mail to Kevin Hunsaker and he says, "Tony, I have serious reservations about what we're doing. As I understand the methodology in obtaining this phone record information, it leaves me with the opinion that it is unethical, at the least, and probably illegal. If it is not totally illegal, then it is leaving Hewlett-Packard in a position that could damage our reputation, or worse. I am requesting that we cease this phone number gathering method immediately and discount any of its information. I think we need to refocus our strategy and proceed on the high ground."

And I think that's an employee of Hewlett-Packard that needs some sort of recognition, maybe give him the day off or something.

But with that, thank you for being with us today, and I know it's been a long day. We appreciate your testimony very much and we have the greatest confidence that you will continue to Hewlett-Packard back to its standing and succeed in every way.

The record will remain open for 30 days.

And with that, the hearing is adjourned.

END

Source: CQ Transcriptions 2006, Congressional Quarterly Inc., All Rights Reserved