Hewlett Packard to pay $14.5 million pretexting settlement

By Jason Bennert, Bay City News Service

December 7, 2006

California Attorney General Bill Lockyer announced today that Hewlett-Packard has agreed to pay a $14.5 million civil settlement stemming from the telephone pretexting scandal.

Under the terms of the settlement, HP will pay $13.5 million to create a new "privacy and piracy fund'' in the attorney general's office which will be used to finance state law enforcement efforts in the areas of privacy and intellectual property violations.

The company will also pay $650,000 in civil penalties and $350,000 for the attorney general's office costs.

"The Hewlett-Packard incident has helped shine a national spotlight on a major privacy protection problem,'' Lockyer said in a statement. "With its governance reforms, this settlement should help guide companies across the country as they seek to protect confidential business information without violating corporate ethics or privacy rights.

"The new fund will help ensure that when businesses cross the legal line they will be held accountable. Fortunately, Hewlett-Packard is not Enron. I commend the firm for cooperating instead of stonewalling, for taking instead of shirking responsibility, and for working with my office to expeditiously craft a creative resolution,'' Lockyer wrote.

HP has also agreed to increase the oversight responsibility of its chief ethics officer and to other structural reforms.

The settlement does not affect the pending criminal charges against former HP board of directors chair Patricia Dunn and four others.

HP has admitted that earlier this year it hired private investigators to obtain the personal phone records of its board members and several journalists in an effort to determine who was leaking information about the company to the media. The private investigators used a tactic known as "pretexting'' in which individuals falsely portray themselves as the owner of a particular phone number and use personal information about the number's owner, such as the last four digits of a Social Security number, to obtain the records of that phone number.

Copyright © 2006 by Bay City News, Inc. -- Republication, Rebroadcast or any other Reuse without the express written consent of Bay City News, Inc. is prohibited.

####