As I See It: Pretexting

“Pretexting” is defined as: A) Invading a country under false pretenses; B) Telling your spouse you’re going to the store for a quart of milk and stopping for a quick beer on the way home; or C) Hiring a lot of lawyers to give the appearance of ethics and objectivity. (For the purpose of this pop quiz ignore the fact that attorneys are paid not to be objective and that lawyers are to ethics what politicians are to truth.) The answer could probably be any of the above, but if you picked “C” you’re a winner, or in Hewlett-Packard‘s case, a loser.

Last Friday, HP trotted out its lawyered-up management to air the latest installment of Powerful Women Gone Wild. First it was Carly Fiorina, the former HP chairman and chief executive officer whose political ambitions clouded her business judgment. The combination of a questionable merger with Compaq and cutting costs through massive layoffs, while leasing two new Gulfstream jets and charging the company for moving her yacht from the East coast to the West, did little to endear her to HP’s employees or its board of directors. Nor, actually, did HP’s plummeting stock prices. She was jettisoned in February 2005.

Well, not jettisoned exactly. HP coughed up $42 million to ease her departure, an experience she later described as “the worst thing I could have imagined.” Now there’s a person who lacks imagination. HP’s stock jumped 7 percent on news of her sacking, however, and it has since more than doubled in value.

But now the board itself is embroiled in a splendid scandal as the directors of the technology firm mud-wrestle with the pesky concepts of ethics and privacy. Until last Friday, Patricia Dunn was the chairman of HP’s board of directors. By all accounts, she is as tough as a hacksaw and a perfectionist to boot. She was not only able to rise to the pantheon of corporate governance, but she did so while beating back no fewer than four blooms of cancer. She has survived breast cancer, melanoma, ovarian cancer and, most recently, surgery for a metastasized tumor that spread to her liver.

Nor has her life been privileged. Her mother was a Vegas showgirl and her father a vaudevillian who died when she was twelve. Nonetheless, she studied economics and journalism at Berkeley and, in one of her early jobs, served as a part-time reporter (one of the many ironies in this ill-scripted drama). However, she soon determined that journalism was likely to leave her impoverished, so she switched to business.

Dubbed by Forbes as one of the 20 most powerful women in business, Dunn began her corporate career as a part-time secretary with what was then known as Wells Fargo Investment Advisors. Through grit and determination, she climbed to the very top of the management mountain, eventually becoming the company’s chairman and CEO. She served on HP’s board during the time Fiorina fell in disfavor and was reportedly instrumental in getting Fiorina fired. As the irony gods would have it, she then succeeded Fiorina as chairman.

During board deliberations on Fiorina’s future, Dunn insisted on strict confidentiality. Alas, the board was comprised of seven chatty people and inevitably information was leaked to the press. Dunn, the perfectionist, was livid and determined to discover the identity of the leaker. Of all the investigative methods available to her, she apparently overlooked the most direct option: She neglected to simply ask the board if anyone was gossiping to the press.

Instead, she hired an outside firm, Security Outsourcing Solutions or SOS, a monument to acronym ingenuity, to investigate the leaks. The investigation was run though HP’s own Global Security department which, although grandly named, was apparently not up to the task. SOS, in turn, subcontracted with an outfit called Action Research Group or ARG, (a company clearly void of even the slightest linguistic cleverness).

SOS and ARG began spying on all seven members of the board (including Dunn), no fewer than nine journalists, two HP employees, plus assorted family members of suspected individuals. At the core of the scandal, are the methods they used to gather information. Pretexting is the act of using an invented scenario to obtain information from a target, usually over the telephone. In this instance, the investigators–with information provide by HP including some Social Security numbers–contacted phone companies, pretending to be the people they were investigating, in order to obtain their personal telephone records.

Impersonating HP directors and journalists, the investigators obtained detailed logs of home and cell phone activity and eventually identified the dreaded leaker: board member George Keyworth.

Dunn, no doubt rummy with the success of her clandestine operation, unveiled the guilty culprit with accusatory fanfare during a full meeting of the board. In that moment she was the single-minded Javert with her elusive prey finally in her grasp.

But the outcome she expected was not the outcome she got. Keyworth, when he learned of the Orwellian investigation, reportedly turned red and said: “Why didn’t you just ask me. I would have told you.”

Oops.

As it turns out, Keyworth had a good friend on the board, Tom Perkins, the legendary Silicon Valley venture capitalist, first general manager of HP’s computer divisions, and director of such notable companies as Genentech, Compaq, Applied Materials, Phillips Electronics, and Tandem. Perkins believed the actions taken by Dunn were unethical and perhaps illegal and he resigned in protest. Keyworth refused to resign, but was not re-nominated by HP for an additional term.

By law, HP is required to notify the SEC and provide an explanation when a director resigns, especially if there are unusual or potentially inflammatory reasons for the resignation. But Dunn compounded an already bad situation by stonewalling reporting of the controversy and Perkins eventually went public.

HP’s dirty laundry was out of the bag and fluttering for all to see.

Which brings us to Friday’s press conference, in which HP management, lead by current president and CEO, Mark Hurd, made several obligatory announcements. Dunn, who initially said she would serve as chairman until January at which time she would relinquish her chairmanship and continue her service as a director, suddenly decided to resign immediately. For its part, HP hired an outside law firm to investigate the investigation. “We never questioned her intentions, her integrity, or her ethics,” the board said in a prepared statement. But having said that they promptly found her explanation lacking and hired outside counsel to cover their collective confidences.

Additionally, Hurd apologized for the “unacceptable measures” which he believed were “isolated instances that do not reflect the broader behavior and values of HP. . . .”

Perhaps not. Perhaps the problem was that the subcontractors had different ethics than their employers, but no one at HP had bothered to check. Of course, maybe that’s why they subcontracted the investigation in the first place rather than running it in house: plausible deniability.

Two HP employees have additionally been targeted to lose their jobs in the management shakeup. Kevin Hunsaker, the chief ethics officer who was no doubt shocked, shocked to discover ethical improprieties, is looking for employment. As is Anthony Gentilucci, the head of HP’s Global Investigations unit who worked hard not to know exactly what the contractors were doing. Irony of ironies, this information was not announced at the press conference, the source of the shakeup was a leak! Will the new board investigate? Stay tuned.

Two additional ironies emerged from HP-gate. It turns out that HP is the co-sponsor of a very special industry award–wait for it–the Privacy Innovation prize, which it promotes in conjunction with the Maine-based International Association of Privacy Professionals. Nominees are currently being accepted but, sadly, if HP were eligible it would not be considered.

And, in a monumental display of hypocrisy, the government which thinks nothing of spying on its own citizens, is huffing and puffing about HP’s use of pretexting in defense of corporate security. The House Energy and Commerce Committee is planning two days of hearings so that congressmen can feign outrage over the same invasions of privacy they condone in the name of national security. Not to be outdone, the Securities and Exchange Commission and the state of California are also investigating.

By corporate standards, spying is relatively mild. Corporations have employed mercenaries to drive native people from their lands; they have marketed products that are known to be unsafe, they have looted pension funds, they have become Enron. Nonetheless, as Nathaniel Brandon said, “There is no such thing as a small breach of integrity.”

In a different time and a different context, when honor and reputation were the measure of a person, no less a giant than George Washington observed: “An ambassador has no need of spies; his character is always sacred.”

May we all be ambassadors.