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Mid-Week Market Rag: Focus on HP Scandal

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This week's mid-week market rag will focus on one topic: the Hewlett Packard scandal.

In a way, Enron and WorldCom closed a chapter in the corporate world book by taking everyday corruption and turning it into something far, far worse.

Thus, they ruined it for everyone else who only wants to be a little corrupt. Federal authorities are clamping down at the first sign of scandal, swindle, or abuse of power. What we have here with HP is certainly not an "Enron," but it, too, goes well beyond your run of the mill corporate greed.

News coming out of HP this week paints a very scary picture, but federal intervention, or at least the potential level of federal intervention, may be part and parcel to the times we live in.

Either way, this is a public relations nightmare for Hewlett Packard and it is making a lot of people in the corporate world shift in their seats at their next board meeting. The news is a public relations nightmare, because, by all accounts, HP-PR had no idea what was going on and now they are left mopping up for what's left of the board of directors.

In case you have not been following, California Attorney General Bill Lockyer announced today that his office would indict officers in the Hewlett Packard Corporation as well as investigators hired by the company for their roles in an "internal probe" aimed at plugging up leaks within HP's corporate structure. Allegedly, sensitive information was being fed to the media from within the HP board. The heads of HP hired private investigators who employed a technique called "pretexting" to obtain phone records and other information from HP directors, employees, and journalists.

Pretexting is the act of pretending to be someone you are not in order to trick a business into giving you information you would not legitimately be able to access. This is most often seen as the practice of obtaining corporate customer information by pretending to be the customer in question.

HP director George Keyworth admitted he did speak with reporters and provide on-the-record and on-background information. This was made public as Keyworth resigned from the board yesterday, according to a press release. Chairman Patricia Dunn also said Tuesday that she would step down, according to a Financial Times report.

Hewlett Packard committed a cardinal sin in the PR world: they cheated. What's more, they bullied their way to acquire information they had no business legitimately obtaining. If information leaks, it leaks. You cannot force a journalist to give up his or her source and it is wrong (and illegal in many states) to use deceit and trickery to obtain the information. HP had a small internal crisis they could and should have handled fully internally, sternly warn the board about sensitive information and move on. Instead, HP broke the law, invaded their employees' privacy and now those responsible face criminal sanctions.

As for the investigative company, their whole spiel looks like a shell game with Boston connections. MarketWatch's Rex Crum laid it out nicely:

    H-P has so far refused to confirm the names of the private investigators, but the Wall Street Journal on Wednesday reported that people familiar with the matter said H-P hired Security Outsourcing Solutions Inc. and its lead investigator Ronald DeLia, of Boston, to do some of the investigation work.

Calls to the number listed on the security firm's website were answered by a receptionist at a law firm who said the company wasn't related to Security. Emails sent to the company were bounced back as undeliverable. Bad HP. Bad bad bad.

Too bad, their marketing was finally getting good.

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  • Bliffle

    Once again the nasty HP cabal that created the Fiorina episode has failed it’s stakeholders with chicanery.