Hewlett-Packard Co. (HPQ) targeted three BusinessWeek reporters among the nine journalists whose phone records it sought through a controversial method known as "pretexting," the computer maker confirmed on Sept. 8. During an investigation of leaks from board members to the press, HP targeted phone records of BusinessWeek writers Peter Burrows and Ben Elgin, based in San Mateo, Calif., and Roger Crockett in Chicago.
BusinessWeek has learned that the Justice Dept. has launched a federal investigation into the case. The U.S. Attorney's Office for the Northern District of California in San Francisco is investigating the reported pretexting, sources close to the investigation confirmed.
INSIDE SOURCES. The HP investigation has raised a furor among Silicon Valley leaders, legal and corporate governance experts, and journalists because pretexting is a possibly illegal method of obtaining telephone records. The computer maker says it hired a private investigator whose outside contractors posed as board members and the journalists to gain access to the phone records.
The HP board met on Sunday, Sept. 10. The company declined to say whether it was an emergency meeting of directors to discuss the fallout from the probe. HP Chairman Patricia Dunn, who initiated the investigation, has said that she would resign from the company if asked to do so by the board. The board meeting on Sunday ended without any decision regarding Dunn or the probe. HP said the board will reconvene on Monday.
HP says it began its investigation in late spring 2005 after a series of leaks about board and management meetings, including details about then-Chief Executive Carly Fiorina's leadership. In January, 2006, the online news service CNET published a story containing information that HP believed only a board member would have known. That was followed by stories in a number of publications, including BusinessWeek, that cited inside sources, prompting Dunn to intensify the probe into who on the board was the source of the leaks.
California Attorney General Bill Lockyer says he believes the practice of pretexting is illegal in the state and has launched an inquiry, though HP says it has not received any subpoenas. AT&T (T) has filed two lawsuits in connection with the HP case, one in San Antonio and one in San Francisco. The suits, each of which target 25 John Doe defendants, seek to block the John Does from accessing AT&T accounts in the future and request the return of all information obtained by the defendants. The lawsuits cite pretexting incidents dating as far back as September, 2004, but AT&T would not say whether any of the incidents cited were directly connected to HP's investigation.
The company also has demanded $10,000 in damages, unspecified punitive damages, and attorney fees.
After Fiorina's departure in early February, 2005, BusinessWeek writers Burrows, Elgin, and Crockett reported on the search for a new HP chief executive. In late March, Burrows, with reporting from Elgin and Crockett, broke the story that current HP CEO Mark Hurd was likely to get the nod.
Burrows has covered HP since March, 2005, when Hurd came on board. He wrote a book about Fiorina's tenure, Backfire: Carly Fiorina's High-Stakes Battle for the Soul of Hewlett-Packard, that was published in January, 2003. Burrows also covered HP from 1995 to early 2003. Elgin had written about HP from February, 2003, until March, 2005. Crockett, however, had not covered HP before he contributed to the stories about HP's CEO search in February and March of 2005.
HP declined to respond to a request by BusinessWeek for details of the time frame when phone records were sought and whether it is currently in possession of any documents.
The matter burst into the public eye on Sept. 5, when news outlets reported that former HP board member Thomas Perkins asked the Securities & Exchange Commission to require HP to file an explanation for his resignation last May. In letters and e-mails obtained by BusinessWeek, Perkins said he resigned to protest the "questionable ethics and dubious legality" of the probe, which Dunn said she launched in late spring of 2005 (see BusinessWeek.com, 9/6/06, "Perkins Goes Up Against HP—Again"). She could not be reached for comment on Sept. 8.
"We are deeply disturbed that our First Amendment rights and the privacy rights of three of our journalists have been violated," says BusinessWeek Editor-in-Chief Stephen J. Adler. "These actions by Hewlett-Packard and its agents potentially endanger the confidentiality of our sources and undermine our good-faith efforts to report matters of public interest. In addition, they invade the privacy not only of our reporters but of all their phone contacts. We urge Hewlett-Packard immediately to provide a detailed account of exactly which records they obtained so we can take appropriate steps to limit the damage."
For its part, HP has officially distanced itself from the methods used by its private investigator and its contractors, in particular as applied to the journalists. "HP is completely dismayed that the reporters' phone records were accessed without their knowledge, and we plan to completely cooperate with the investigation being conducted by the California Attorney General," HP spokesman Michael Moeller said.
Other writers targeted by HP's investigation include Pui-Wing Tam and George Anders of The Wall Street Journal (DJ), John Markoff of The New York Times, and Dawn Kawamoto and Tom Krazit of CNET News.com. HP would not reveal the ninth journalist for whom it sought records or the time frame in which it sought them. HP's Moeller also confirmed on Sept. 8 that the company will make apologies to the journalists.
Moeller also added that HP still believes it had the right to investigate the leaks. "What's being lost in the course of these events is that serious transgressions at the board level took place where confidential information that should have remained confidential was leaked to the press," he said.