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HP Settles Spy Rap with California
HP has managed to wriggle off the hook with the California Attorney General's office
Dec. 14, 2006 03:00 PM
HP has managed to wriggle off the hook with the California Attorney General's office as far as its silly headline-rich boardroom-directed spying adventure goes.
It's cut a deal to avoid prosecution on the civil charges that the AG has been contemplating. The complaint, which carries an injunction, was filed along with the settlement Thursday in the Santa Clara County Superior Court. There was no finding of liability and no civil charges will be brought against any current and former directors, officers or employees of the company.
The settlement does not cover HP's former chairman Patti Dunn, its ex-ethics officer Kevin Hunsaker and three of its PIs, who are all up on four felony charges apiece and are all still jailbait.
California doesn't specifically outlaw pretexting but Lockyer stretched existing law to cover the occasion and said HP, the company, faced a set of civil charges identical to the criminal charges the HP Five are looking at.
For its sins, HP is going to pay $14.5 million, the bulk of it dedicated to a new "Privacy and Piracy Fund" that the AG's Office wants to set up to finance other privacy and IP investigations and prosecutions.
Apparently HP worked with the AG's office to create what Attorney General Bill Lockyer called "a creative resolution."
"Fortunately, HP is not Enron," he said, and cooperated.
Aside from the $13.5 million earmarked for the fund, HP will also pay $650,000 in civil penalties and another $350,000 to cover the costs of the attorney general's investigation. And it will adopt corporate governance reforms to strengthen in-house monitoring, ensure compliance with legal and ethical standards and protect privacy rights during any other investigations it undertakes.
Those reforms specify that a new independent director serve as the board's watchdog on ethics and report any violations to the AG among others; that HP's chief ethics and compliance officer (CECO) review the company's investigative practices and make any recommendations for improvements to the board by the end of next July; that the CECO report to the board's audit committee as well as HP's general counsel; that the CECO have the authority to retain independent legal counsel; that HP's chief privacy officer review the company's investigative techniques; that HP set up a new Compliance Council, headed by the CECO and including the chief privacy officer, deputy general counsel for compliance and the head of internal audit, to develop and maintain policies and procedures governing ethics and compliance that reports periodically to the CEO, audit committee and the board; and that HP beef up the ethics and conflict-of-interest components in its training program and create a code of conduct for use by outside investigators that address privacy and business ethics.
For a company like HP these mandated reforms have got to be harder to swallow than writing the check. The reforms will be under court supervision for five years.
HP also has to settle with the SEC and some other agencies.
HP said it had designated its newest board member Wachovia CEO Kennedy Thompson to be the board's ethics watchdog and that its CECO was Jon Hoak, the ex-general counsel of NCR, where HP CEO Mark Hurd hails from. It has hired Bart Schwartz, who served under Rudi Giuliani when he was US Attorney, to review its investigative techniques.
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