Marketplace Report: H.P. Lawyer to Testify on Spying

Toip Hewlett Packard attorney Ann Baskins resigned Thursday, the latest casualty in a corporate scandal over alleged spying on company board members and journalists. Baskins has agreed to testify before a congressional committee about the incident. Janet Babin of Marketplace talks with Madeleine Brand about the latest developments in case.

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MIKE PESCA, host:

Back now with DAY TO DAY. A Congressional hearing into Hewlett-Packard's questionable business practices convenes today in Washington. Among the things they are looking into is who leaked company information to news organizations. Hewlett-Packard's general counsel, Ann Baskins, resigned today. MARKETPLACE's Janet Babin is here.

And Janet, what are lawmakers asking the H.P. officials?

JANET BABIN: Well, Mike, as you can imagine, they're asking a lot of questions at this hearing. Congressman Ed Whitfield wanted to know, you know, why no one at H.P. was able to stop what was going on here. The problem is that so far the members, the House members are not getting many answers, and that's because most of the H.P. officials before the committee have invoked their Fifth Amendment right against self-incrimination, and they're not testifying. Although Chief Executive Mark Hurd is still expected to testify sometime today.

PESCA: Well, go back a little, because the accusations against Hewlett-Packard go way beyond leaking to news organizations, right?

BABIN: Yeah. It gets pretty complicated. So initially someone inside H.P., as you said, was apparently sharing information about the company with reporters, and the board didn't like it. So to find out who was leaking, they employed this private detective company and then that company hired people who engaged in pretexting, and what that is is that, you know, when you impersonate someone else to get your phone records.

So they got all these private phone records of H.P. directors, employees, and at least nine reporters, and they also put some people under surveillance. They sifted through these people's garbage, and they used an e-mail sting to try to figure out where reporters were getting their information.

Now, H.P. chairwoman Patty Dunn resigned over this last week, and in her prepared testimony today before the board she said - or rather before the committee, the sub-committee - she said that she was assured that H.P.'s investigation was legal. Charles Elson heads the University of Delaware Center for Corporate Governance, and he says, Mmm, no, most people would realize that what was going here was definitely not right.

Professor CHARLES ELSON (University of Delaware): The idea of using surreptitious means to acquire information, whether they involve pretexting, lying, following people around - in my view these are not ethical ways of doing business.

BABIN: So Elson says, you know, he understands that H.P. would not want, you know, employees leaking information, but think Richard Nixon here, Mike. You know, the ends does not justify the means in business.

PESCA: We hope so. One can only hope.

BABIN: Right.

(Soundbite of laughter)

PESCA: And I think there's a larger question here. Pretexting, which seems to be legal, maybe the government will look at it not just in a business context, because from what I've been reading, pretexting might open us all up to having our phone records looked into.

BABIN: Exactly. Coming up later today on MARKETPLACE, we're going to look at how the pharmaceutical industry is avoiding paying some of its taxes.

PESCA: Thanks, Janet. That's Janet Babin of public radio's daily business show MARKETPLACE. It's produced by American Public Media.

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