California attorney general charges HP insiders in spy probe

SAN JOSE, Calif. (AP) -- Prosecutors filed criminal charges Wednesday against Hewlett-Packard's former chairwoman and four others involved in the corporate spying scandal that has shaken the Silicon

Wednesday, October 4th 2006, 9:59 pm

By: News On 6

SAN JOSE, Calif. (AP) -- Prosecutors filed criminal charges Wednesday against Hewlett-Packard's former chairwoman and four others involved in the corporate spying scandal that has shaken the Silicon Valley tech giant long revered for its ethics and professionalism.

California Attorney General Bill Lockyer accused two ousted HP insiders -- chairwoman Patricia Dunn and chief ethics officer Kevin Hunsaker -- and three outside investigators -- Ronald DeLia, Matthew DePante of Melbourne, Fla. and Bryan Wagner of Littleton, Colo. --
of violating state privacy laws in HP's crusade to root out the source of boardroom leaks.

They each face four felony counts: use of false or fraudulent pretenses to obtain confidential information from a public utility; unauthorized access to computer data; identity theft; and conspiracy to commit each of those crimes. Each charge carries a fine of up to $10,000 and three years in prison.

The case was filed in Santa Clara County Superior Court in San Jose.

HP CEO Mark Hurd is not among those charged, nor was HP's former General Counsel Ann Baskins, who had some oversight of the company's investigation of media leaks.

At an afternoon news conference, Lockyer said California has some of the strictest privacy laws in the country and Californians value them so much that they are enshrined in the state constitution. Therefore, he said, it's crucial that those who break them are prosecuted.

"One of our state's most venerable institutions lost its way as its board sought to find out who leaked confidential company information to the press," he said, vowing to hold those who broke the law accountable.

Lockyer asked the court to issue arrest warrants for those charged. His office said it has arranged for Dunn and Hunsaker to surrender and hopes the out-of-state defendants will voluntarily waive extradition to California.

The scandal erupted last month when HP disclosed that detectives it hired to root out a series of boardroom leaks secretly obtained detailed phone logs of directors, employees and journalists. The detectives used a potentially criminal form of subterfuge known as
pretexting to masquerade as their targets and trick telephone companies into turning over the records.

According to the criminal complaint, private investigators working for HP compromised the personal data of more than 24 people, including HP directors, employees and journalists. By March, the detectives had compiled records of 1,750 phone calls made on 157 cellular phones and 413 landlines.

In one of the more egregious cases, an impostor posing as CNET journalist Dawn Kawamoto in January successfully had Kawamoto's cell phone password removed, logged into her online account and changed the password. Several days later, someone viewed Kawamoto's detailed call log for nine minutes.

Pretexting will become a criminal offense in California when a new law signed by Gov. Arnold Schwarzenegger takes effect Jan. 1. Violators will be punished by $2,500 in fines and up to a year in jail, though the law will not retroactively apply to the HP investigation.

Dunn -- who initiated the investigation -- said she didn't know until after the fact that the detectives went to such extremes to unearth clues about the leaker's identity. She resigned from HP's board last month amid the uproar over the probe.

Dunn's lawyer, James Brosnahan, said his client has fought for good corporate governance her entire career and will fight the charges "with everything she has."

"These charges are being brought against the wrong person at the wrong time and for the wrong reasons," he said in a statement.

Dunn, 53, who has survived breast cancer and melanoma, will begin chemotherapy treatments for advanced ovarian cancer on Friday at the University of California, San Francisco, according to a person close to Dunn who asked to remain anonymous because a formal announcement wasn't planned.

Lawyers for the others charged did not immediately return calls seeking comment, but DeLia asserted his innocence in a statement he read to The Associated Press.

"I am innocent of these charges," DeLia said. "I've been a professional private investigator for more than 30 years. I respect the law and I did not break the law in the HP investigation."

He refused to elaborate on his statement or take questions.

HP said in a statement it is cooperating with Lockyer as well as federal authorities who are also exploring possible criminal charges. The Palo Alto-based company declined further comment.

HP's stock has largely been immune to the scandal swirling around its board, and Wednesday was no exception. It rose 60 cents, or 1.6 percent, to close at $38.02 on the New York Stock Exchange. Earlier in the day it reached a 52-week high of $38.14.

The criminal case against Dunn and the others may be difficult to prove if they can show they were simply relying on legal opinions assuring them HP's tactics were legal, said Jamie Wareham, a Washington, D.C. defense lawyer specializing in corporate law.

Wareham also questioned whether Lockyer rushed the charges to generate publicity in the weeks leading up to the Nov. 7 election. Lockyer, a Democrat, is running for state treasurer.

"It was a stupid and unethical thing that occurred, but it may not have been a crime," he said.

Lockyer's spokesman, Tom Dresslar, disputed the idea that the timing was politically motivated, saying "the only motivation is to hold accountable individuals who broke California laws designed to protect privacy."

HP eventually identified director George Keyworth II as the source of a leak to a CNET Networks Inc. reporter. Keyworth resigned after the scandal went public in early September.

Another director, venture capitalist Thomas J. Perkins, resigned from the board in May after learning about the tactics, then pressured the company to publicly disclose the reason for his departure.

Hunsaker, who directed the investigation, left the company on Sept. 26; DeLia runs a Boston-area detective firm called Security Outsourcing Solutions, a longtime HP contractor commissioned to conduct the leak probe.

DeLia in turn hired DePante's company to gather information, and Wagner was hired to obtain the private phone records. According to the complaint, Wagner acknowledged destroying the computer linking him to the HP probe "because it had incriminating evidence on it and he would not assist in locating it."

Rep. Edward Markey, D-Mass., a senior member of the House Energy and Commerce Committee, said Lockyer's move "indicates that prosecutors are beginning to move forward to address the violations that occurred here."

Still, Markey added, congressional action is needed to tighten the penalties on pretexting. A bill, approved earlier by the committee, has been stalled in the House.

"We need to pursue a new direction in this country that ensures consumers will no longer be vulnerable to intrusions into their families' privacy, either by their employer, by the government or by criminals seeking to turn information into money," he said.