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Final shoe falls in HP pretexting hoax

In what was likely the last result of HP's 2006 pretexting investigation hoax, the US Securities and Exchange Commission (SEC) issued a "cease-and-desist" order against HP. The SEC demanded that HP stop withholding information about why one of its directors left the HP board.

The SEC and HP settled on the matter, instead of levying fines against the company, or any other penalty. The SEC ordered HP to stop its failure to disclose why director Tom Perkins resigned from the HP board abruptly last spring. Perkins left over HP's investigation into a press leak and accusations of misconduct by director George Keyworth. The vendor did not admit or deny the SEC's findings as its part of the settlement.

While the vendor is far from the first company to use such pretexting tactics in its internal investigations — its hired private eyes pretended to be phone company officials, to gather private information — HP was the first No. 1 computer vendor to use the trick. HP CEO Mark Hurd said the matter left HP with repair to do on its image. "This company will regain not just its reputation as a model citizen with the highest ethical standards — we will regain our pride,"

Some members of the 3000 community pointed to the California Attorney General's office as the instigator in the debace. The AG was running for re-election in five week's time.

HP's resigned chair, Patricia Dunn, fingered HP's legal department in the matter. HP's General Counsel Ann Baskins, a 24-year-employee of the company, resigned at the same time, then plead the Fifth to avoid testifying. In February, HP appointed Michael Holsten to the counsel position, after Holsten and the Morgan, Lewis & Bockius law firm led HP's internal review of the pretexting hoax.

Holsten said in a statement that HP believes it acted in a proper manner, but "we understand and accept the SEC's views and are pleased to put this investigation behind us."

But after resignations from Baskins, Dunn and several others, and the firing of key HP security executives, the vendor shouldered a $14.5 million California state fine. Dunn, who was cleared in a criminal investigation, launched the probe of reporters, their family members and former HP directors. An outside investigation subcontractor, paid by HP, used the pretexting tactics, and evidence surfaced that HP staff knew about those tactics but did not stop them.

HP staff issued a report on the tactics to CEO Mark Hurd, who claimed he did not read the March, 2006 document. The report assured HP executives that pretexting tactics are legal.