Last Phase of HP's $6.3M Settlement Over Spy Scandal OK'd

A Delaware state court judge has approved the final phase of a $6.3 million settlement of shareholder suits over a boardroom spying scandal at Hewlett-Packard Co. following the ouster of CEO Carly Fiorina and the acquisition of Compaq Computer Co.

Vice Chancellor John Noble dismissed the consolidated suits in the Delaware Chancery Court and awarded $2.5 million in attorney fees to the plaintiffs.

Hewlett-Packard in April paid $3.8 million and agreed to corporate governance changes to settle related suits in California's Santa Clara County Superior Court.

None of the HP officer and director defendants admitted to any wrongdoing in either set of suits.

Suits filed in Delaware, where HP is incorporated, and California, where its headquarters are, claimed former board Chairwoman Patricia Dunn, President Mark Hurd and general counsel Ann Baskin breached their duty, wasted corporate assets and exposed the company to millions of dollars in liability by hiring private detectives who used shady tactics to flush out a director who had been leaking information to the press.

The suits said that when the board forced out Fiorina last year following the ill-fated acquisition of competitor Compaq Computer Co., it was divided into two factions: one that supported Dunn and one that did not.

When details of the turmoil in the HP boardroom over Fiorina and other matters leaked into the financial press, Dunn allegedly told private investigators to use whatever tactics necessary to find the leaker.

In one of those methods, called "pretexting," the investigators impersonated the people they were investigating and used their Social Security numbers to access their phone records, the suit says.

The investigators identified the leaker as one of the directors, who was later forced to resign from the board.

Another director in the "anti-Dunn faction" resigned in protest and later notified the Securities and Exchange Commission and the California attorney general about the pretexting.

That led to criminal charges against Dunn and other executives and the plethora of shareholder suits.

In the California settlement of the shareholder actions the defendants agreed to tighter restrictions on director actions and greater disclosure to shareholders.

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Various plaintiffs in the Delaware actions were represented by Seth Rigrodsky and Brian Long of Rigrodsky & Long in Wilmington, Del., and Joseph Weiss and James Tullman of Weiss & Lurie in New York.The defendants were represented by Lawrence Ashby of Ashby & Geddes in Wilmington and Eric Holder and Lanny Breuer of Covington & Burling in Washington.