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SEC to broaden HP inquiry

Tags:
Leak,
Probe,
SEC,
HP

Ina Fried CNET News

Published: 22 Sep 2006 17:20 BST

HP has received an additional inquiry from the Securities and Exchange Commission (SEC) regarding both the company's leak probe disclosure and its handling of the resignation of board member Tom Perkins, the company said on Thursday.

In a regulatory filing, HP said it "recently has received" a request from the SEC's enforcement division asking for records and information relating to Perkins' resignation, two earlier SEC filings, as well as "investigations conducted by HP or any of its directors into possible sources of leaks of HP confidential information."

The company "intends to co-operate fully with this request", it said in the filing.

HP also said in the filing that it has entered into a "mutual release and indemnification agreement" with Perkins and former director George Keyworth, who stepped down last week. Under the deal, HP will pay for a variety of legal and other expenses, including costs the two incur related to government inquiries or lawsuits over the leak probe.

HP and the directors agreed to release each other from any legal claims they might have. However, both reserve the right "to prosecute any claims against all security, investigative or business intelligence firms, the agents, contractors or subcontractors used by those firms" as well as any other third parties. The deal also includes an agreement that none of the parties will disparage one another.

The moves come amid a widening probe into the methods HP used to attempt to uncover the unauthorised release of information to the media. HP has said its investigators obtained personal phone records of more than a dozen people using a method known as "pretexting", in which records are obtained under false pretences. The list of those targeted includes board members, two employees, nine journalists and an unspecified number of others.

The company also used physical surveillance and sent CNET News.com reporter Dawn Kawamoto a fake email that may have had code intended to track who saw the email, an investigator has told Kawamoto.

HP Chairman Patricia Dunn, who ordered the leak probe, said last week that she will step down as chairman in January, though she said she will remain as a director. The company's board has been meeting this week in a session that was scheduled before the pretexting scandal broke. HP has scheduled a press conference with chief executive Mark Hurd for Friday.

California Attorney General Bill Lockyer has said he believes he has enough evidence to bring criminal charges against people inside and outside the company. The FBI and US Attorney's Office have also launched criminal probes. A congressional committee has also scheduled hearings for next week, asking a variety of people to testify, including Dunn and general counsel Ann Baskins.

HP has said it would co-operate with all of the government probes.

Lockyer, in a Bloomberg TV interview earlier on Thursday, said HP had moved from co-operating to stonewalling and that if he continued to see a lack of co-operation, he would instruct his staff to issue subpoenas, according to a spokesman for Lockyer. Following that interview, HP lawyers contacted Lockyer's office and indicated that they wanted to continue co-operating.

"The lack of co-operation we had been experiencing recently appears to be corrected," said Lockyer spokesman Tom Dresslar. "Indications are we will be getting quick access to interview subjects and the like."

HP's stock, which has held relatively steady since the scandal broke earlier this month, dropped more than 5 percent on Thursday. The drop follows reports in the Wall Street Journal and Washington Post that Hurd may have authorised the email sting on Kawamoto. The Journal also reported on Thursday that the House committee investigating HP may yet call Hurd to testify at the 28 September hearing.

HP said in a statement late on Thursday that Hurd "has offered to appear" at the hearing. The House Energy and Commerce Committee will accept Hurd's offer to testify, News.com learned late on Thursday.