Case 5
The HP Pretexting Predicament
News leaks seemed to plague Hewlett-Packard.
The first leaks surrounded the ouster of chairwoman and chief executive Carly Fiorina. In the
midst of this internal turmoil, the Wall Street Journal
published an article with details of closed-door
board discussions about the planned management
reorganization. An external legal counsel interviewed board members but did not succeed in
identifying the leak. Evidence of more leaks
appeared a year later as news organizations once
again described the deliberations of closed board
and senior management meetings in extensive
detail. It was clear that someone from inside was
leaking information. In addition to board members, reporters from such publications as the New
York Times, Wall Street Journal, BusinessWeek, and
CNET became targets of the ensuing investigation
into ten different leaks. The methods used to try to
plug these news leaks led eventually to a board
shake-up, which included the departure of nonexecutive chairwoman Patricia Dunn.
THE INVESTIGATION INTO
THE LEAKS
Investigating board members is a difficult proposition. As the source of the potential leaks, the board
could not supervise what was essentially an
investigation of themselves. Neither could the
employees handle the investigation, because that
would have put them in the untenable position of
investigating their own bosses.1 Left with few
options, HP board chairwoman Dunn turned the
investigation over to a network of private investigators. According to Dunn, she could not supervise
This case was prepared by Ann K. Buchholtz, University of Georgia.
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the investigation, because she was a potential
target.2 Dunn asked the head of corporate security
to handle the investigation, as this was the person
who handled employee investigations, but he still
had conflicts of interest as an employee of the
board.3 So the company outsourced the investigation to a network of outside investigators, telling
them to conduct it within the confines of the law.4
In one sense, the investigation was successful
because evidence pointed to one board member,
George Keyworth, as the source of seven of the ten
leaks. Keyworth admitted that he was the source
of the leaks: the board asked him to resign, but he
refused, at which point the company said it would
not nominate him for reelection. Keyworth subsequently resigned. The investigation did not uncover the source of the remaining three leaks, but
it seemed that the problem was resolved.
THE FALLOUT FROM
THE INVESTIGATION
The HP investigation into news leaks may be a
case of the cure being worse than the disease.
Although the primary source of the leaks was
uncovered, questions remained about the process
of the investigations. One board member, Thomas
J. Perkins, resigned from the board in protest over
the way in which the investigation and notification
of the outcome was handled. He had wanted the
matter handled privately rather than aired in front
of the entire board. Perkins sought information
about how Hewlett-Packard investigated the
leaks, asserting that phone and e-mail communications had been recorded improperly.5
HP indicated that, although no recording or
eavesdropping occurred, investigators had used a
The HP Pretexting Predicament
form of “pretexting” to elicit phone records.
Pretexting is a way of obtaining information by
disguising one’s identify. In this case, investigators
used pretexting to obtain phone records of not
only HP board members but also reporters who
covered the story. In addition, investigators
followed board members and journalists and
watched their homes. They also planted false
messages with journalists in an effort to get them
to reveal their sources inadvertently through
tracking software included in the fake messages.6
At the time of this investigation, pretexting was
in a gray area of legality. Dunn reported that she
consulted lawyers before approving the investigation, and they told her that pretexting was within
the law.7 Months later, a law was passed due
largely to the furor over the Hewlett-Packard
investigation, as a result of which pretexting
became illegal. The Telephone Records and Privacy Protection Act of 2006 specifically outlaws
the use of fraud to obtain billing records and other
information from phone companies about their
customers.8 Of course, the new law is not retroactive, and so it does not impact the HewlettPackard controversy.
Opinions varied over what the consequences, if
any, should be for Chairwoman Dunn. According
to Charles Elson, director of the Weinberg Center
for Corporate Governance at the University of
Delaware, “I think it’s going to be very hard for
her to stay. This was a mess created in the
boardroom and someone has to be responsible.”
In contrast, Yale School of Management professor
Jeffrey Sonnenfeld opined that Ms. Dunn should
be given credit for acting against boardroom
cronyism and that dismissing her would show
“nothing but cowardice.”9
On September 22, 2006, Patricia Dunn handed
in her immediate resignation at the request of the
Hewlett-Packard board. In her defense, she said
that, although she was responsible for identifying
the leaks, she did not suggest the specific methods
to be used. She said that those who performed the
investigation “let me and the company down.”10
Ms. Dunn’s lawyer added that she “went to the
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Case 5
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right people and she was assured that what they
were doing was legal.11 Mark V. Hurd, who
served as CEO throughout the process of the
investigations, succeeded Ms. Dunn. His involvement in the investigations was peripheral, as he
was an employee of the board. However, e-mail
and cell phone records show that he approved the
“sting” operation that sent false messages and
tracking software by e-mail to reporters.12 In
addition, the company’s investigators gave Mr.
Hurd a copy of their report on their operations,
but Mr. Hurd did not read it. “I could have and I
should have,” said Mr. Hurd.13
Questions for Discussion
1.
2.
What are the ethical issues in this case?
Who are the stakeholders impacted by this
situation? How would you rank their claims?
3.
Was the investigation into the recurring news
leaks ethical? Why or why not? What actions
would you recommend that a company in a
similar situation take?
What should happen to the people involved in
the situation? Should Ms. Dunn have been
asked to resign? Should Mr. Hurd be able to
remain and be given the role of board
chairman?
4.
5.
Where do you draw the line between personal
privacy and an organization’s right to know?
If something unethical is happening, to what
extents should an organization be able to go to
determine who is at fault?
Case Endnotes
1.
2.
3.
Damon Darlin, Julie Cresswell, and Eric
Dash, “H.P. Chairwoman Aims Not to Be
the Scapegoat,” New York Times (September
9, 2006), C1.
Damon Darlin, “Deeper Spying Seen in
Hewlett Packard Review,” New York Times
(September 18, 2006), A1.
Darlin, Cresswell, and Dash, C1.