HP to pay US$14.5m to settle bugging case

Computer giant Hewlett-Packard Co (HP) has agreed to pay US$14.5 million to settle civil charges linked to a boardroom espionage scandal, California state officials said on Thursday.

State Attorney General Bill Lockyer said most of the money will be paid into a new law enforcement fund "to fight violations of privacy and intellectual property rights, and adopt corporate governance reforms."

The deal resolves the liability of the world's second biggest computer maker over the scandal, in which private investigators hired by the firm obtained the telephone records of nine journalists, two HP workers, and seven current or former board members in an effort to find the source of boardroom leaks.

The agreement does not affect a criminal case against HP's ousted chairwoman Patricia Dunn and four others, Lockyer said.

"The Hewlett-Packard incident has helped shine a national spotlight on a major privacy protection problem," Lockyer said in a statement.

"Fortunately, Hewlett-Packard is not Enron. I commend the firm for cooperating instead of stonewalling, for taking instead of shirking responsibility, and for working with my office to expeditiously craft a creative resolution," he said.

The settlement requires HP to pay US$13.5 million to a new "privacy and piracy fund" for law enforcement activities related to privacy and intellectual property rights.

Additionally, HP will pay US$650,000 in civil penalties and US$350,000 to cover the attorney general's investigation and other costs.

Mark Hurd, HP's chief executive who assumed the role of chairman after Dunn was ousted, said the company agreed to corporate governance reforms in addition to the monetary penalties.

"We are 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," he said.

HP said there was "no finding of liability" against the company as part of the settlement.

Dunn and former ethics lawyer Kevin Hunsaker resigned from HP in September amid the controversy about unethical and potentially illegal tactics used to expose a board member who had been leaking secrets to news reporters.

Dunn was among HP executives grilled by incredulous members of Congress at a hearing in Washington. She repeatedly denied endorsing any wrongdoing.

Hunsaker was one of 10 former HP executives and outside private detectives who declined to testify before Congress.

Criminal charges are still pending against Dunn and Hunsaker along with Ronald DeLia, who headed an outside security firm used by HP and two employees of Florida-based information broker Action Research Group.

As part of the deal announced on Thursday, HP agreed to appoint a new independent director to serve as the board's watchdog on compliance with ethical and legal rules. It also agreed to allow its chief ethics and compliance officer to have expanded oversight and reporting duties.