HP in $14.5m settlement after leak crisis

Hewlett-Packard has agreed to pay $14.5m to settle civil claims brought by California’s top prosecutor in the wake of an internal investigation into boardroom leaks that plunged the computer maker into crisis this year.

Under the deal, HP agreed to pay $13.5m to create a “Privacy and Piracy Fund” inside the California attorney-general’s office. The fund will be used to investigate and prosecute violations of privacy and intellectual property laws.

The settlement included no finding of liability against HP.

HP will also pay $650,000 in penalties and $350,000 to cover the cost of the attorney-general’s investigation into the scandal, in which HP’s operatives spied on board members, journalists and their families in order to identify the source of a boardroom leak.

HP also agreed to follow through a series of previously announced governance reforms. In return, Bill Lockyer, the California attorney-general, agreed to drop all civil claims against the company and its current and former officers, including Mark Hurd, chief executive and chairman.

Those claims included a civil complaint, filed alongside the settlement on Thursday, accusing HP of violating privacy and identity theft laws by using false pretences to uncover the source of media leaks.

“Fortunately, Hewlett-Packard is not Enron,” Mr Lockyer said. “I commend the firm for co-operating instead of stonewalling, for taking instead of shirking responsibility, and for working with my office to expeditiously craft a creative resolution.”

Mr Hurd said HP was “pleased to settle this matter with the attorney-general and are committed to ensuring that HP regains its standing as a global leader in corporate ethics and responsibility”.

HP’s deal comes as Patricia Dunn, HP’s former chairman, and four others are fighting criminal charges brought by Mr Lockyer for their alleged roles in the leak probe. HP itself still faces battles on several legal fronts, including inquiries by the US attorney’s office, the Securities and Exchange Commission, the Federal Communications Commission and derivative shareholder suits in Delaware and California.

HP’s shares crept fractionally higher in after-hours trading.

Ms Dunn and other former HP officials pleaded not guilty to identity theft and other felony charges last month.

Although Thursday’s settlement left open the possibility that the company could face criminal charges, HP said that, “based on what we know, we do not believe the company is going to be prosecuted”.