Hewlett-Packard Company (NYSE:HPQ) announced yesterday in an SEC filing that Thomas J. Perkins had suddenly resigned from the Board of Directors. In his mandatory filing with the SEC in the event of a resignation, he expressed concern over the way HP was handling investigations designed to uncover individuals leaking news and trade secrets. This announcement forced HP to reveal its entire investigation, which has been causing controversy on the street. In their 8K filing with the SEC, HP stated their case:

"HP has been the subject of multiple leaks of confidential HP information, including information concerning the internal deliberations of its Board of Directors.  HP believes these leaks date back to at least 2005.  In response to these leaks, outside legal counsel conducted interviews of directors in early 2005 in order to determine the source of the leaks and to obtain each director’s reaffirmation of his or her duty of confidentiality.  The interview process did not yield the source of the leaks.  Notwithstanding these actions, the leaks continued.  As a result, the Chairman of the Board, and ultimately an internal group within HP, working with a licensed outside firm specializing in investigations, conducted investigations into possible sources of the leaks of confidential information at HP.  Those investigations resulted in a finding that Dr. George A. Keyworth II, one of HP’s directors, did, in fact, disclose Board deliberations and other confidential information obtained during Board meetings to the media without authorization.  At a Board meeting on May 18, 2006, after Dr. Keyworth acknowledged that he had leaked confidential information, the Board, after deliberation, asked Dr. Keyworth to resign his position as a director, which he declined to do.  It is at that meeting that Mr. Perkins resigned from the Board after expressing personal frustration with the Chairman of the Board relating to the handling of the matter with the Board.  He stated that he objected to the matter being brought before the full Board and that he believed the Chairman had agreed that he and she would handle the matter privately.  The Chairman disputed Mr. Perkins’ assertion, explaining that she was complying with advice from outside counsel on the appropriate handling of the matter.  At the time, Mr. Perkins confirmed he did not have any disagreement with HP on any matter relating to HP’s operations, policies or practices."

But there was one line which caused so much controversy:

"HP informed Mr. Perkins that no recording or eavesdropping had occurred, but that some form of 'pretexting' for phone record information, a technique used by investigators to obtain information by disguising their identity, had been used."

Apparently, HP had hired an outside investigative firm to obtain the information. Pretexting occurs when someone pretends to be someone else in order to obtain information. For example, to obtain phone records, an investigator may call the phone company pretending to be a customer by giving false credentials and personal information. Although this technically not illegal on a national level, the state of California is investigating whether or not it is a punishable offense under state law. In the end, HP has found at least one of its leakers and they will likely face very little reprecussion as a result of the techniques they used, other than the loss of Mr. Perkins.

Related Companies
Dell, Inc.  (NDAQ:DELL)
IBM (NYSE:IBM)