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Lockyer Probe of HP Spying Reaches to ’05

Times Staff Writers

The criminal investigation into corporate spying at Hewlett Packard Co. extends as far back as early 2005, suggesting that the company began prying into private phone records long before the current scandal.

People familiar with California Atty. Gen. Bill Lockyer’s probe into HP’s efforts to ferret out the source of boardroom leaks to the media said Tuesday that the state’s top prosecutor was examining the legality of tactics used at least since March 2005, when Chairwoman and Chief Executive Carly Fiorina was ousted.

That was nearly a year before her successor as chairwoman, Patricia C. Dunn, initiated the investigation at the center of a drama that has riveted Silicon Valley.

Private eyes hired by the company this year obtained the phone records of nearly two dozen employees, directors and reporters in an attempt to identify the source.

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The wide-ranging spying also included physical surveillance, photographs and spyware sent via e-mail, and it targeted spouses and other relatives of HP board members and reporters, according to a consultant’s report prepared for the company that was obtained by the Washington Post.

Lockyer has said he has enough evidence to indict people both in and outside HP -- a company once admired for “the HP Way” of honesty and fair dealing.

“The attorney general is focused on the events in 2006 but is looking at the company’s actions in 2005 as well,” said one source who requested anonymity because the probe is continuing.

In what may be a case of the hunter becoming the prey, Fiorina, who railed against leaks since a boardroom fight in 2002, may have been among those whose private phone records were obtained. Fiorina is listed as a possible victim of HP’s tainted investigation into boardroom leaks, the source said.

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In the months before she left, Fiorina had asked Larry Sonsini, the company’s outside legal counsel, to look into numerous disclosures of boardroom information. According to another source, he sat down with each director separately to remind them of their fiduciary duties and to ask them whether they had divulged confidential information.

But Dunn, who was just as angry about the leaks as Fiorina was, took more drastic action.

Dunn consulted HP’s security department, which includes its Boston-based global investigations unit. That unit engaged Security Outsourcing Solutions Inc., a small Needham, Mass., investigations firm, which in turn hired a Florida investigations company, Action Research Group, to allegedly obtain the phone records.

“Nothing came of the first investigation,” said a person who has been briefed on the results but asked to remain anonymous because of the sensitivity of the information.

But the boardroom leaks continued and, after a period of dormancy, the investigation was restarted early this year after the Wall Street Journal reported on HP’s discussions about acquiring another company, whose stock jumped substantially on the news.

“Now, the board says, ‘We really need to do something,’ ” said a person briefed on the investigation.

This time, the investigation zeroed in on director George A. Keyworth II, who later acknowledged being a source of the leaks. He denied disclosing any damaging information.

The scandal erupted when Keyworth’s friend and fellow director, Thomas J. Perkins, protested the methods used in the investigation. These included a ruse known as “pretexting,” in which private investigators allegedly posed as others to obtain the phone records of nearly two dozen people -- including Keyworth, Perkins, nine journalists and at least two HP employees.

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Perkins resigned in protest. Dunn has agreed to step down as chairwoman in January. Keyworth also has resigned.

Dunn has maintained that she relied on the advice of HP lawyers and outside counsel, who assured her that the investigation was conducted legally.

Michael Moeller, a company spokesman whose own records were obtained through pretexting, said Tuesday that the company had instructed its outside investigators to keep the probe on the up and up.

“We instructed the outside investigators that they needed to stay within legal limits and needed to adhere to our standards of business conduct,” he said. “We were not informed as clearly as we should have been of those techniques. After our investigation of the investigation, it became clear that inappropriate techniques had been used.”

Moeller would not elaborate on the involvement of the global investigations unit or its head, Anthony Gentilucci, who declined to comment Tuesday. Nor would he discuss the roles of the outside investigators, who have been identified by others as Security Outsourcing and Action Research.

Ronald DeLia, who runs Security Outsourcing, did not respond to repeated requests for interviews. Joseph DePante, who owns Action Research, declined to comment.

“My lawyer says I can’t talk to anybody,” he said this week. “But I do appreciate your call. Have a great day!”

Lockyer, who has confirmed Security Outsourcing’s suspected involvement, has not identified others in what he has described as a complex “chain of vendors” engaged to stop the leaks.

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In an effort to shed light on that chain, a House Energy and Commerce Committee panel is sorting through thousands of pages of records submitted by HP in advance of a Sept. 28 hearing.

Dunn, Sonsini and general counsel Ann O. Baskins have agreed to appear, committee spokesman Terry Lane said. All three are expected to testify and not invoke their 5th Amendment right against incriminating themselves, Lane said.

HP spokesman Ryan J. Donovan confirmed that Dunn and Baskins would appear, but he would not say whether they would testify.

DeLia also is expected to appear at the hearing but indicated he may refuse to testify, Lane said. The committee on Tuesday also said it had sent requests to Gentilucci and DePante. The committee is expected today to grant subpoena power to the chairman and top Democrat in case any of the witnesses decide not to appear.

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james.granelli@latimes.com

kim.christensen@latimes.com

jim.puzzanghera@latimes.com

Granelli reported from Costa Mesa, Christensen from Los Angeles and Puzzanghera from Washington.


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