HP Settles Civil Complaint for $14.5MBy Scott Ferguson | Posted 2006-12-07 Print
Under the agreement with the California Attorney General's Office, the company will admit no liability in the pretexting case that also led to criminal charges against the board's director and four others.
Hewlett-Packard has settled its civil case with the California Attorney General's Office, and the company will pay $14.5 million in fines but admit no liability, according to a statement released Dec. 7.
In addition to the fine, HP, which is based in Palo Alto, Calif., agreed to implement a series of legal and ethical measures to ensure that any future internal investigations into boardroom leaks are conducted according to California law, the company said in a statement.
In turn, California prosecutors will not pursue civil charges against the company or its current and former employees and members of the board of directors. The civil case accused HP of violations of the state's privacy laws.
The case stems from an internal investigation by HP that started in 2005 to identify the source of leaks from the company's board of directors to various news organizations. Later, in 2006, the investigation started again and HP officials were accused of hiring investigators who may have used "pretexting" to find the source of those leaks to the press.
Pretexting is a controversial method of using a person's Social Security number and other personal information to trick telephone companies into giving investigators private telephone records.
Reports of that investigation eventually led the California Attorney General's Office to file criminal charges against Patricia Dunn, the former chairman of the company's board of directors, and four other people thought to be connected in the case.
The civil case is separate from the criminal case. Dunn and the others involved have pleaded not guilty.
Under the terms of the agreement, HP will pay $13.5 million to a privacy and piracy fund to help California prosecutors in consumer fraud and privacy-violation cases. The company will also pay $650,000 in statutory damages and an additional $350,000 to repay the prosecutors for the cost of the investigation.
"We are pleased to settle this matter with the Attorney General and are committed to ensuring that HP regains its standing as a global leader in corporate ethics and responsibility," said Mark Hurd, HP's CEO and board chairman.
In addition to the financial agreement, which was filed in the Santa Clara County Superior Court on Dec. 7, HP agreed to several stipulations with prosecutors, and these conditions must remain in place for five years.
Some of these conditions, including the appointment of a chief ethics and compliance officer and an expert in the field of investigative practices, and already been completed. HP must also expand and rewrite parts of its ethics code and employee training materials.
HP also appointed board member G. Kennedy Thompson, the CEO of Wachovia, as its independent director with the responsibility of ensuring that the company is in compliance with the new ethic and legal rules.
Despite the public clamor, as well as the civil and criminal charges, the pretexting scandal has not affected HP's core IT business. On Nov. 16, the company reported that its revenue for the fourth financial quarter grew 7 percent from the same time period a year ago.
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