Last updated: August 7, 2010 12:39 am

Hurd ousted from HP amid personal scandal

Mark Hurd, chief executive of Hewlett-Packard, was forced out of the company on Friday amid a scandal stemming from his relationship with a former marketing consultant to the world’s biggest computer maker.

The abrupt departure, over claims involving the mishandling of expenses, marked the fall of one of the computer industry’s most highly-regarded executives. It was also one of the prominent corporate departures involving allegations of lapses in personal ethics.

Mr Hurd’s departure followed an allegation of sexual harassment that was made by the former contractor in late June, HP said. After an investigation into the claim, HP said it had found no violation of its own sexual harassment policy, but that it had uncovered “numerous” instances in which its chief executive had made invalid expense claims.

It also claimed there had been many other instances in which the unnamed consultant had filed claims for expenses and fees that were invalid, though it did not provide further details.

In a devastating critique of one of the most prominent US business leaders, Mike Holston, HP’s general counsel said of the departure: “It had to do with integrity, had to do with credibility, had to do with honesty.”

One person familiar with the situation said that HP had identified questionable expense claims of up to $20,000 over the past two years. Another person close to Mr Hurd said that his relationship with the female consultant had involved a friendship, and that there had been no romantic connection.

HP later disclosed that Mr Hurd will receive his contractual severance payments from the company, which were estimated by one person close to the case at nearly $40m.

HP moved quickly to reassure Wall Street about the computer maker’s health, raising its earnings forecast for the rest of this year and naming its chief financial officer, Cathie Lesjak, as interim chief executive.

However, the departure robs HP of a highly-regarded executive who is credited with pulling off a successful turnround of the computer maker, and wiped nearly 10 per cent from its share price in aftermarket trading.

Commenting on the departure, Ms Lesjak said: “It has nothing to do with the performance of the company. It is all about his behaviour and judgment.”

In a statement, Mr Hurd said: “After a number of discussions with members of the board, I will move aside and the board will search for new leadership.”

He described his departure as “a painful decision for me to make after five years at HP, but I believe it would be more difficult for me to continue as an effective leader”.

HP said it had started a search for a new full-time chief executive.

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