HP chairman quits in spy scandal as Fiorina prepares to dish dirt

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Patricia Dunn, the embattled chairman of the computer manufacturer Hewlett-Packard, bowed to the inevitable yesterday and quit over the spying scandal that has captivated Silicon Valley and threatened to tear the company's board apart.

Although she had originally intended to stay in the post until the new year and then keep a seat on the board, Ms Dunn was finally pushed out by new revelations that HP hired private detectives to tail board members and to obtain the private phone records of at least 18 directors, employees and journalists.

Mark Hurd, the chief executive, will add the chairmanship to his duties, consolidating his position despite admitting that he had approved some - but not all - of the tactics used in HP's leak investigation. In his first public comments on the scandal last night, Mr Hurd said he had been given, but did not read, a report on how the investigation had been conducted. And he said the full extent of the surveillance conducted on HP's behalf by its private detective contractors may never be known. "This a complicated situation. The more I look into it, the more complicated it becomes," he said.

Silicon Valley veterans have been shocked by the poisonous atmosphere in the HP boardroom, and agog at the lengths to which the company was willing to go to unmask the source of leaks to the press. Tactics included elaborate sting operations and - most controversially - impersonating directors and journalists in order to obtain their private phone records, a practice known as pretexting.

California's attorney general, Bill Lockyer, has said he will press charges against someone - but it is still not clear who. Mr Lockyer said yesterday there was no evidence Mr Hurd knew illegal pretexting had been used.

Mr Hurd insisted the motives behind the mole hunt were appropriate, since leaks of boardroom discussions were a serious breach of confidentiality, but the techniques used were "very disturbing". He said: "On behalf of Hewlett-Packard, I extend my sincere apologies to those journalists who were investigated and to everyone who was impacted."

HP revealed that private detectives had rooted through the bins of at least one journalist, and had tailed one board member, members of his family, and at least one reporter. Internal e-mails reported earlier this week had already shown that HP employees discussed trying to get private eyes to pose as secretaries and cleaners in the San Francisco offices of the Wall Street Journal and the technology website CNET in order to spy on the journalists there.

Mr Hurd also confirmed that he signed off on part of an elaborate sting operation against a Silicon Valley journalist. HP created an online identity for a fake boardroom "mole" - they called him Jacob - and sent pretend internal presentations embedded with tracer software to the journalist, in the hope that she would send it on to her boardroom source. Mr Hurd denied knowing about the tracer.

Mr Hurd has won plaudits from Wall Street for cutting costs and turning round the trading performance of HP since joining the company 18 months ago. HP shares rose in after-hours trading yesterday, amid relief that his position had been strengthened rather than threatened by the scandal.

He and Ms Dunn are scheduled to testify under oath on Thursday before the House of Representatives energy and commerce committee, which is investigating the pretexting.

Meanwhile, details are emerging of the new autobiography in which Carly Fiorina, the former chairman and chief executive, plans to dish the dirt on the boardroom backstabbing that unseated her 18 months ago and led to the current crisis. It was press reports about board members' concerns over her arrogant management style that first led Ms Dunn to consider the need for a leak inquiry.

The book, Tough Choices, will come out in a blaze of publicity on 9 October and threatens to prolong HP's agony. According to a person who has seen an advance copy, Ms Fiorina opens her opus with the line: "In the end, the board did not have the courage to face me."

She is believed to offer some stinging criticisms of her boardroom nemeses, veteran HP directors George Keyworth - who resigned this month after being revealed as the source of press leaks - and Tom Perkins, who quit earlier this year over the tactics being used in the mole hunt.

The reader told BusinessWeek that Ms Fiorina reveals how her childhood hero was Cinnamon Carter, the strong female character from the Mission: Impossible television series. What she does not do in the book is admit to many mistakes at HP, beyond saying she "trusted the wrong people".

Ms Fiorina is planning a number of high-profile television interviews to accompany the book launch, and extracts are expected to be published in Newsweek magazine.