NEWSWEEK COVER: Scandal at HP: The Boss Who Spied on Her Board
NEW YORK, Sept. 10 /PRNewswire/ -- Hewlett-Packard has now admitted spying on its own directors' personal phone records in order to root out a leaker. It did so by using private investigators who engaged in "pretexting" -- calling up phone companies and impersonating themselves as the directors seeking their own records, writes Senior Editor David A. Kaplan. Chairman of the Board Patricia Dunn insists Director Tom Perkins was just as eager to learn the identity of the leaker as she was. "Tom was the most hawkish member of the board for plugging the leaks, which he thought were coming from management. He advocated the use of lie-detector tests." Perkins, who spoke to Newsweek exclusively, said that he was just being facetious about lie-detector tests, and regarded the whole leak investigation as a diversion from more serious competitive issues facing HP. As part of Newsweek's September 18 cover story, "The Boss Who Spied On Her Board" (on newsstands Monday, September 11), Kaplan offers a blow-by-blow account of the scandal that has rocked the venerable technology firm.
Dunn, a success story in her own right, as well as a profile in courage for her fight against Stage IV ovarian cancer, stands accused of orchestrating the surveillance, which neither the other directors knew of. Perkins quit in a rage over the surveillance and wants Dunn out as chairman; HP is painting him as an angry traitor with a vendetta against Dunn. "If I did anything stupid, it's not because I have cancer or was receiving chemotherapy," she told Newsweek. Perkins himself calls her "nobody's fool"-deft at running annual meetings and a tough questioner. Early in their time together on the HP board, Perkins and Dunn got along and were actually allies: they were part of the team that lured Mark Hurd to HP from NCR. But their different outlooks as directors could not help but emerge. Perkins, the venture capitalist, thought in broad strategic strokes, preferring to leave the details to others. Dunn thought the core of her job was to dot the I's and cross the T's-to keep her board "process-driven" rather than "personality-driven."
In January 2006, the online technology site CNET published an article about HP's long-term strategy. While the piece was upbeat and innocuous, it quoted an anonymous HP source and contained information that only could've come from a director. It is not uncommon for companies to monitor the phones and computers of their employees. But "pretexting" goes a step beyond. The investigators use phony IDs-typically, the last four digits of your Social Security number-to obtain your phone records from unwitting phone companies. In an interview with Newsweek, Dunn said that she was aware HP was obtaining the phone records of suspected leakers as long ago as 2005. But she says she didn't know about the pretexting until late June, when she saw an e-mail to Perkins from HP's outside counsel, Larry Sonsini. "I was told it was all legal," she says. She now acknowledges that HP's tactics were "appalling" and "embarrassing," but says the current "brouhaha" grew out of a personal dispute between her and Perkins."
Dunn sprang the identity of the leaker at a meeting of her fellow directors on May 18, at HP headquarters in Palo Alto, Calif. Dunn laid out the surveillance and pointed out the offending director, who acknowledged being the CNET leaker. He was 66-year-old George (Jay) Keyworth, a science adviser to President Reagan and the longest-serving HP director. Thunderstruck, Keyworth apologized but said to the board, "I would have told you all about this. Why didn't you just ask?" Keyworth was asked to leave the room and did so. Mark Hurd, the CEO, reportedly was asked by one director how he would handle a leak by an employee. "I would have no choice but to fire him," Hurd replied.
Other directors were noncommittal. Perkins says he was the only director who rose to take Dunn on directly. Perkins told the directors he was enraged at the surveillance, which he called illegal, unethical and a misplaced corporate priority. "Pattie, you betrayed me," he says he railed at Dunn. "You and I had an agreement that if we found out who did this, we would handle it offline without disclosing the name of the leaker." Dunn now charges that Perkins was just trying to protect his friend Keyworth. "He's angry that I stood in his way to cover up the results of our investigation and the identity of the leaker." Perkins dismisses the charge as a red herring-corporate spin to obscure larger issues. There may indeed be deeper issues at work. Dunn tells Newsweek that Perkins has been agitating to vote her out as chairman for a while. Perkins denies this, but there is no question their styles clash.
Perkins came to learn more about HP's use of pretexting. He discovered that he himself was hacked. In mid-June, according to a letter Perkins sent to the full HP board, Perkins contacted Sonsini and asked him to look into the Dunn investigation. In an e-mail to Perkins obtained by Newsweek, Sonsini acknowledged that Dunn's security consultants "did obtain information regarding phone calls made and received by the cell or home numbers of directors" and that it was "done through a third party that made pretext calls to phone-service providers." That was the first time Perkins had heard the word "pretexting."
Sonsini's legal tiptoeing just incensed Perkins more, deciding to approach a host of government agencies, as well as prosecutors in California and New York. HP scrambled to go on the offensive, and made a filing last week to the SEC, laying out the pretexting story for public consumption. The story exploded in the press (first in a piece on Newsweek.com). Dunn, interviewed by Newsweek on Saturday, was philosophical. "My goal in this job was to help the board overcome its conflicts. I was unsuccessful. I wanted to show that two people at opposite ends of the spectrum could work together. That was naive."
*Read entire cover story at newsweek.com |
