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HP wants to enhance its ability to enforce its laws against property theft

09 января 2007
HP said that it would pay $14.5 million to settle a lawsuit by the California attorney general over the company’s use of private detectives to obtain private phone records of board members and journalists.

The company is paying $650,000 in fines for “statutory damages,” but the bulk of the money, $13.5 million, is going to create a state-administered Privacy and Piracy Fund. The fund is to finance the investigation of consumer privacy violations and of intellectual-property theft, including the copying of movies and music.

“We wanted very much to enhance our ability to enforce our laws against property theft,” Bill Lockyer, the attorney general, said in an interview.

The remainder of the settlement, $350,000, will cover the state’s expenses in its investigation of the case, which stemmed from the company’s effort to trace news leaks from its board.

There was no finding of liability against HP. But the agreement, filed along with the civil suit in state court Thursday, includes an injunction specifying changes to internal processes that the company must make and maintain for five years. Mark V. Hurd, the company’s chairman and chief executive, has already made several of the required changes, like the appointment of an outside expert to review the company’s investigative practices.

The settlement also includes an agreement by the attorney general not to pursue further civil claims against the company, its current and former directors, its officers or its employees.

Mr. Lockyer said the amount of the settlement was determined using a provision of the state’s unfair business practices law that calls for a $2,500 fine for each violation. Mr. Lockyer said an “appropriate number” was determined by counting the number of phone calls that were monitored by Hewlett-Packard.

Hewlett-Packard reported revenue of $91.7 billion for its 2006 fiscal year. The settlement is equivalent to what it brings in about every 83 minutes.

Mr. Lockyer filed criminal charges in early October, 2006, against five people, including Patricia C. Dunn, the former HP chairwoman, and a former company lawyer, accusing them of violating state privacy laws. All have pleaded not guilty.

In those cases, the attorney general contends that company officials passed on information to private investigators — who in turn passed it to other private investigators — that allowed the private phone records of several board members and journalists to be viewed. The investigators used a form of subterfuge, called pretexting, to obtain the records by pretending to be someone else.

The settlement of the civil suit ends the company’s problems with state investigators. But on the federal level, the Justice Department, the Securities and Exchange Commission and the Federal Communications Commission are investigating the company’s conduct during its leak investigations in 2005 and 2006.

By Damon Darlin, The New York Times

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