Congress Subpoenas Trio Tied to HP Boardroom Spying

Two employees of Hewlett-Packard and a contractor hired to help investigate boardroom media leaks have been subpoenaed to testify before Congress.

Senior counsel Kevin Hunsaker and Global Security Manager Anthony Gentilucci both received subpoenas to testify before the House Energy and Commerce Committee’s oversight and investigations subcommittee on Thursday. Also called to testify was Ronald DeLia, the head of a Boston-based corporate investigations firm that oversaw the internal probe.

Gentilucci — whose resignation from HP was announced Monday — may refuse to testify before the committee by invoking his Fifth Amendment right against self-incrimination, his attorney said. Hunsaker may be in the process of negotiating his departure from HP, according to some accounts.

The three who were subpoenaed are among a long list of HP executives and others who will testify over the course of a two-day hearing starting Thursday, with the main focus likely to be on the use of pretexting, or obtaining phone records by claiming to be the person to whom those records belong.

Others Will Talk

HP CEO Mark Hurd and former Chairman Patricia Dunn are among those who have been called to testify — however, they were not subpoenaed. Dunn formally resigned late last week.

HP’s scandal occurred at a time when the committee was already in the midst of a seven-month-long investigation into consumer privacy in the telecommunications field. Pretexting and other types of data-sharing have been getting the lion’s share of the attention.

Congressional committees have been known to use their subpoena power to convince reluctant witnesses to testify, but it is not clear whether the committee will gain any insight from those summoned. It’s unlikely any major admissions will be forthcoming without a promise of immunity.

The California Attorney General and federal regulators are also conducting probes with possible criminal charges described as just days away in the case of the state investigation. Those ongoing probes will likely be enough to convince witnesses to decline to answer questions.

Call for Better Board

Separately, a group of powerful pension and retirement funds, which combined own nearly US$700 million worth of HP stock, called for new corporate governance rules to be adopted to create a more diverse and responsive board of directors.

The group, which includes the New York State Common Retirement Fund, the Connecticut Retirement Plans and Trust Funds, and the North Carolina Retirement Systems, submitted a proposal to HP that would give shareholders more say in board elections. The proposal asks HP to changes it bylaws to allow groups that hold 3 percent or more of the company’s stock for at least one year to nominate HP board members.

“Proxy access is critical to insuring shareholder rights. While we wait for the Securities and Exchange Commission to rule on this topic regarding all corporations, we are moving forward on a case-by-case basis to establish what should be a basic right for all shareholders,” said New York State Comptroller Alan G. Hevesi, who oversees that state’s public pensions, which are worth $140 billion.

The move was necessary due to the “unethical and possibly illegal actions of HP’s board and leadership,” said North Carolina Treasurer Richard Moore. “The current scandal has hurt stock prices and could significantly weaken the company’s long-term value. Now is the time for real change.”

Investors Remain Loyal

Apart from a one-day drop after reports were published suggesting that Hurd was kept abreast of the investigation, investors have stuck by HP. That likely reflects a belief that the company remains well-positioned in the PC and enterprise technology markets.

In fact, one side effect of the fallout from the scandal so far has been the consolidation of power for CEO Mark Hurd, who is credited with engineering a turnaround at HP since taking the helm last year.

“Hurd has quickly won a lot of respect for what he’s done to improve HP’s outlook, and it would take significant negative news to tarnish that,” Gartner analyst Martin Reynolds told the E-Commerce Times. While the boardroom scandal seems to be lingering longer than many would like, the fundamentals at HP remain positive, with the company trimming costs even as it gains on rivals such as Dell.

Financial analysts were equally upbeat, with several maintaining buy recommendations on HP stock.

“Our view has been the HP leak investigation, although interesting from a societal perspective, is largely irrelevant to the investment case,” Merrill Lynch analyst Richard Farmer said in a research note Monday. “A board makeover is not necessarily a negative for a company that is remaking its culture around accountability.”

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