California charges 5 in HP corporate spying case

Prosecutors in California filed criminal charges yesterday against former Hewlett-Packard Co. chairwoman Patricia Dunn and four others implicated in a corporate spying campaign, including a private investigator from Needham.

The charges represent the most aggressive move to date by any of the state and federal agencies probing how Dunn's efforts to plug boardroom leaks to news reporters beginning in 2005 came to include tricks like ``pretexting," or lying, to obtain the personal phone records and other data about company directors, employees, and journalists.

State Attorney General Bill Lockyer filed four felony charges against each of the defendants, accusing them of using false or fraudulent grounds to obtain confidential information from a public utility, unauthorized access to computer data, identity theft, and conspiracy to commit those crimes. He also asked a judge to issue arrest warrants for Dunn, former company ethics chief Kevin Hunsaker, Needham private eye Ron DeLia, and two other investigators.

``One of our state's most venerable corporate institutions lost its way," Lockyer said in a statement . ``In this misguided effort, people inside and outside HP violated privacy rights and broke state law. . . . Those who crossed the legal line must be held accountable."

As they did after the accounting scandals that rocked Enron and WorldCom, politicians have seized on the allegations against HP executives and their private detectives to demand tighter restrictions on practices that many believe are widespread in corporate America.

But while many of the recent high-profile cases against corporate chieftains involve deceiving investors about their companies' financial predicaments, the charges in the HP case revolve around allegations of trickery at a financially robust corporation. Its shares rose 60 cents to close at $38.02 before the charges were announced yesterday, and have risen since September despite the ongoing news of the investigation.

Jim Post, a Boston University management professor, said the case ``is unquestionably going to be a landmark in the clash between corporate privacy and personal privacy." But the charges have already taken a toll: ``HP has lost its reputation as a paragon of ethical business practice, [and] Dunn, Hunsaker and the others have lost their personal reputations as well," he said.

The charges could bolster investors' confidence in the short term, since Lockyer did not charge the company or any of its current officers with wrongdoing. Chief executive Mark Hurd has already apologized for the snooping, and the company said in a statement it is cooperating with state and federal investigators.

``It sounds like skullduggery," said Robert Ullmann, a former federal prosecutor now in private practice at Nutter, McClennen & Fish. ``But I'm not sure any shareholders were hurt."

At a press conference yesterday, however, Lockyer said that his investigation remains open.

DeLia, of Needham, is one of three Massachusetts figures who played a central role in HP's leak probe, according to Lockyer's complaint and documents obtained by congressional investigators.

``I am innocent of these charges," DeLia said yesterday in a brief telephone call. ``I have been a professional private investigator for more than 30 years. I respect the law and I did not break the law in the HP investigation."

An attorney for Dunn said in a statement that the charges against her are false.

``These charges are being brought against the wrong person at the wrong time and for the wrong reasons," attorney James Brosnahan said of the 53-year-old executive, who is about to begin treatment for advanced ovarian cancer.

An attorney for Hunsaker declined to comment. The two others charged are Matthew DePante, manager of a Florida investigations firm DeLia allegedly hired to do the pretexting, and Bryan Wagner of Littleton, Colo., whom DePante allegedly hired to call telephone companies and pretend that he was one of the targeted journalists or board members in order to obtain their phone records.

An attorney for the Florida firm, Richard Preira, said that his client is not guilty of any wrongdoing, and that he knows of no state or federal law that ``addresses the conduct they're alleged to have engaged in."

He also argued that the tactic of pretexting is legitimate because law enforcement officials have encouraged its use by hiring outside investigators to obtain private records. ``It is unfortunate that in the wake of the HP scandal, corporate America and Congress will now do what they are designed to do most efficiently -- find a scapegoat for their lack of vigilance," he said.

Wagner did not return a message seeking comment.

The charges come less than a week after a hearing in Congress in which lawmakers grilled Dunn and others about their actions. While DeLia, Hunsaker, and others invoked their constitutional right not to answer questions, Dunn testified for several hours about the origin of the leak probe and said she believed that only legal tactics were used. She also disputed statements DeLia gave to HP attorneys that he had kept her fully briefed on the course of the investigation.

Lockyer appears to accept DeLia's version of events. The charging documents state that DeLia told Dunn on June 15, 2005, the telephone records were obtained ``by ruse" from telephone companies.

The matter began when Dunn and others became alarmed at news stories that cited unnamed sources discussing boardroom matters. The efforts by DeLia and others eventually identified one source as board member George Keyworth, who resigned Sept. 12. Keyworth acknowledged speaking with reporters but said his remarks were not damaging.

The matter blew into public view at the insistence of another former board member, Tom Perkins, and last month Hewlett-Packard began to acknowledge the pretexting and other tactics such as sending a fake e-mail to a reporter, tailing outsiders, and inappropriately using individuals' Social Security numbers. At other times the investigators also considered planting spies in newsrooms.

Lockyer's case centers on the pretexting, which a supporting court document states was used to compromise the telephone, fax, and cellular accounts of 24 people in all.

Post, of Boston University, said the naming of Dunn was a surprise and showed her public defense ``has not immunized her." As for DeLia, ``the question is, did he or should he have known that the techniques were crossing the legal line," Post said. ``It seems to me that's what he's got to defend against."

Ross Kerber can be reached at kerber@globe.com.