HP Investigation Broadened by SEC

Hewlett-Packard has entered into mutual agreements with two former directors caught up in the board spying scandal not to file lawsuits over the dispute.

The company disclosed the agreement in a filing to the U.S. Securities and Exchange Commission on Thursday. In the same filing, HP said it has agreed to pay some of the directors’ legal expenses in connection with the investigations.

The SEC has asked for more information on the circumstances surrounding Thomas Perkins’ resignation from HP’s board of directors over the spying scandal, HP said in the filing.

HP CEO Mark Hurd

HP also revealed the terms under which Perkins and director George Keyworth left the board. They resigned after it was revealed that private investigators hired by HP may have used illegal methods to identify Keyworth as the source of leaks of board deliberations to the news media.

Separately on Thursday, HP said chief executive officer Mark Hurd “has offered to appear” before a House subcommittee probing the scandal. Other HP executives, Chairman Patricia Dunn and others implicated in the scandal have accepted invitations to appear at a Sept. 28 hearing.

HP said in the SEC filing that it has entered into a “Mutual Release and Indemnification Agreement” with Perkins and Keyworth in which the two former directors agreed not to file claims against other directors, officers or employees of HP. In turn, the company agreed not file claims against them. HP will also pay legal fees Perkins and Keyworth may incur in cooperating with government investigations of the scandal. Besides the House inquiry, the California Attorney General and the U.S. Attorney for Northern California are conducting probes.

The SEC filing also said Perkins and Keyworth reserve the right to take legal action against private investigation companies that HP allegedly hired to probe the source of board leaks. HP told the SEC on Sept. 6 that it had discovered those outside firms engaged in a possibly illegal practice called “pretexting” while digging into the personal phone records of directors, HP employees and journalists. The investigators’ probe identified Keyworth as the confidential source. He initially refused to resign when confronted by the board in May, but he quit on Sept. 12.

HP also said in the filing that it is cooperating with an SEC request for additional information about the circumstances of Perkins’ resignation in May. HP’s SEC filing at that time noted Perkins’ resignation without elaborating. Perkins, who said he resigned in protest of the way HP was conducting its investigation, later lobbied the company to amend its notice with more detail.

Hurd is set to lead a news conference Friday at HP headquarters in Palo Alto, California, to reveal the results of a separate investigation of HP’s leak probe. After the scandal broke and reports surfaced about how involved HP executives may have been in overseeing the private investigators’ activities, HP brought in the law firm of Morgan, Lewis & Bockius LLP to investigate. A representative of the firm will present its findings at the news conference.

News reports in recent days have revealed Hurd, Dunn and other HP executives were more involved in the leak probe than they had earlier indicated.

-Robert Mullins, IDG News Service (San Francisco Bureau)

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