Lawmakers compare HP spy scandal to Enron, Watergate

WASHINGTON -- The saga of Hewlett-Packard Co.'s spying scandal -- which has toppled the company's chairwoman, two other directors and at least two high-ranking executives -- deepened in intrigue Thursday as lawmakers exploring the imbroglio summoned comparisons to Watergate and Enron.

Members of the House Energy and Commerce Committee demanded to know how investigators for the respected Silicon Valley anchor could use tawdry tactics such as "pretexting," or impersonating HP directors, employees and journalists to obtain their phone records.

In one key document cited by the panel, an HP investigator had warned higher-ups, including the company's now-fired chief ethics officer, that the methods used to find the source of boardroom leaks were possibly illegal and at the very least could damage the company's reputation.

But few answers emerged. Ten people involved in the cloak-and-dagger operation -- including the former ethics officer and General Counsel Ann Baskins, who resigned Thursday -- asserted their Fifth Amendment right against self-incrimination, refusing to answer questions.

The panel heard from CEO Mark Hurd, who replaced Patricia Dunn as chair last week. He apologized for the investigatory tactics but denied having direct knowledge of the probe's methods.

"If Bill Hewlett and Dave Packard were alive today, they'd be appalled," he said, referring to the company's founders.

Hurd said Dunn had told him of the existence of the investigation but he was not involved in the probe itself.

Earlier, during hours of questioning, Dunn stumbled at times and corrected herself when asked how much she knew of the shady tactics, including when she learned that the investigators had used pretexting to obtain telephone records. While saying she was unaware of the details, she repeatedly defended the probe as necessary to stem serious leaks of confidential information.

"If I knew then what I know now, I would have done things very differently," Dunn said. Still, she said, "I do not accept personal responsibility for what happened."

She said it wasn't until July that she became aware that pretexting was part of the "standard arsenal" of the investigators' tactics.

"I dispute having ever understood or being told that the fraudulent use of identity was ever a part of this investigation," Dunn insisted. Like other HP directors and journalists who were targeted in the probe, she, too, ended up being pretexted, Dunn said.

Fred Adler, an investigator in the company's security department, told the panel he had heard that Vince Nye -- his colleague who had warned superiors on the boardroom leak probe -- also had complained about previous use of pretexting.

HP's outside lawyer, Larry Sonsini, who appeared with Dunn, insisted that contrary to recent news reports, he never took the position that pretexting is legal. He also testified he and his firm were "not involved in the design or conduct of the investigations."

Lawmakers on the committee expressed outrage at HP's actions and disbelief that Dunn and others didn't realize that obtaining personal phone records from people without their consent could be illegal.

In addition to pretexting, company investigators surveilled their subjects and their relatives, sifted through their garbage and sent an e-mail with tracing technology in an attempt to dupe one reporter.

"We have before us witnesses from Hewlett-Packard to discuss a plumbers operation that would make Richard Nixon blush were he still alive," Democratic Rep. John Dingell of Michigan said.

Other lawmakers said the situation was reminiscent of the Enron Corp. debacle, in which top management claimed not to know of serious wrongdoing that ultimately brought the company down. The panel members said the comparison was especially disappointing considering that HP, a 67-year-old computer and printer maker, has a reputation for integrity.

"It's a sad day for this proud company," said Rep. Diana DeGette of Colorado, the panel's senior Democrat. "Something has really gone wrong at this institution."

Rep. Ed Whitfield, R-Ky., chairman of the committee's investigative panel, demanded to know why, with many high-ranking HP executives and attorneys involved in the probe, "No one had the good sense to say 'Stop."'

The committee sought testimony from Ronald DeLia -- the operator of the detective firm hired by HP -- and two other key figures in the leak probe: Kevin T. Hunsaker, until recently the company's chief ethics officer, and Anthony R. Gentilucci, who managed HP's global investigations unit in Boston. They, along with outside investigators believed to have served as the foot soldiers in the company's efforts, took the Fifth.

That deprived the committee of an explanation of why HP higher-ups apparently dismissed one investigator's warnings that the probe was venturing into dangerous territory.

"I have serious reservations about what we are doing," Nye, a senior investigator in HP's security department, wrote in a Feb. 7 e-mail. "I am requesting that we cease this phone-number gathering method immediately and discount any of its information."

As lurid details of the affair emerged in recent weeks, casualties have mounted at HP, which was No. 11 on Fortune magazine's most recent tally of the biggest U.S. companies. HP announced general counsel Baskins' resignation just ahead of the hearing.

Besides the inquiry by the House committee, federal and California prosecutors are investigating whether company insiders or outside investigators broke the law. California Attorney General Bill Lockyer has said he has enough evidence to indict HP insiders and contractors. And the Securities and Exchange Commission is pursuing a civil inquiry.

HP shares have been largely unaffected during the probe; investors are most concerned about the fate of Hurd, who is credited with turning around the company's performance in his 18 months as CEO. The shares gained 1.6 percent to close at $35.97 on the New York Stock Exchange.

"The biggest question facing HP right now is whether Mark Hurd comes out of these hearings with his credibility intact," said James Post, a Boston University professor specializing in corporate governance. "And his credibility is going to hang on how good a job he does handling all these tough questions. I doubt if he has ever been through something like this before."