Hewlett-Packard Under Scanner

Hewlett-Packard Co. finds itself in soup after California's attorney general Bill Lockyer subpoenaed some HP officials on Wednesday in a probe, whether the company used questionable tactics to investigate the 2005 boardroom leaks.

HP disclosed in a filing with the Securities and Exchange Commission that it sought the private telephone records of the company's board members in its leak investigation.

Private investigators used the practice of "pretexting" to obtain the requisite information. Pretexting involves calling a telephone company pretending to be a customer to obtain calling records without that customer's permission. Hewlett-Packard hired private investigators, who in turn used pretexting to try to ferret out which company directors had leaked information to reporters.

Lockyer refused to comment on whether criminal charges would be filed against Chairwoman Patricia Dunn or the other directors or the private investigators. He hinted that the state also could charge HP with civil violations and order the company to pay fines.

Lockyer said, “There are potentially two penal statutes that have been violated that could result in criminal liability…..I don't have a settled view on whether it was illegal yet, but it certainly was colossally stupid.”

HP said that it would cooperate with the state probe and that no recording or snooping of directors' phone conversations had occurred.

The action by HP has attracted widespread criticism. Rebuffing the action, Peter Morici, professor at the Professor Robert H. Smith School of Business at the University of Maryland said, "If the chairman thinks this is the way business ought to be conducted, maybe it's time for her to take a sabbatical…..It's arrogant and inappropriate."

Mired in controversy, even if Hewlett-Packard, the 11th largest company on the Fortune 500, tries to make the case that it was trying to protect its shareholders, there would be no takers. As they say, “There is no right way of doing a wrong thing.”