HP responds to insider trading lawsuit
November 30, 2006
The Associated Press is reporting this morning that HP is being accused of insider trading. The claim was added to a lawsuit filed in Santa Clara County, California when the company was accused of spying on reporters, board members and others.
In an amendment to that lawsuit, investors allege that the company CEO Mark Hurd CEO Mark and seven other executives got rich unfairly by selling HP stock worth $41.3 million during the two weeks prior to the spying scandal becoming public in early September. Those two weeks saw more insider HP stock traded than at any other time in five years, according to the suit. Most of the sales involved cashing out stock options.
HP responded to the suit by saying that it had no merit. It's a typical early-stage response from any company that's been sued. The trouble in the lawsuit seems to be the financial motive behind the insider sales. HP's stock price is now higher than it was in mid-August, two weeks before HP admitted to violating privacy.
If those executive options got sold in August instead of November, the top HP insiders didn't get the best price they could've had during 2006. HP shares were above $36 before the spying news broke. Today they're above $39 a share, and even topped $40 since the spying accusations.
The new lawsuit action also consolidated other suits in California over the media-leak probe at HP. The probes, conducted over the past two years, led to criminal charges against former Chairwoman Patricia Dunn, former ethics chief Kevin Hunsaker and three private detectives - Ronald DeLia, Matthew DePante and Bryan Wagner.
None of this has dragged down HP's shares, however. With a Dow roaring above 12,000 and the company's Q4 and year-end reports looking rosy, HP stock has been climbing since mid-summer. The lawsuit asks for unspecified damages, as well as alleging that HP wasted corporate assets and initiated a $6 billion stock buyback in August “to prevent a free-fall in the Company’s stock price as the news of the defendants’ misconduct reached the market.”
HP's response said the suit “represents a transparent effort to exploit issues related to HP’s recent investigation for personal gain at the expense of HP, its shareholders and its employees. HP will defend itself vigorously.”