December 14, 2006, 8:47 AM — Two U.S. Congressmen have asked Hewlett-Packard Co. (HP) Chief Executive Officer Mark Hurd to explain why he sold US$1.37 million worth of HP stock just before the company's spying scandal became public.
Congressmen John Dingell and Mark Stupak, both Michigan Democrats, sent a letter to Hurd Wednesday requesting an explanation and asking for a response by Dec. 21.
"We look forward to responding to the committee's inquiry," said HP spokeswoman Emma Wischhusen.
Both congressmen are ranking members of the investigations subcommittee of the House Energy and Commerce Committee, which in September held hearings on the HP pretexting scandal. In his testimony, Hurd apologized for the investigation HP undertook in which private investigators used false pretenses, called pretexting, to gain access to the phone records of people being investigated to trace leaks of board deliberations to the media.
In their letter, Dingell and Stupak note that Hurd sold $1.37 million in stock options on Aug. 25, the same day Hurd was briefed by attorneys for Wilson Sonsini, one of HP's outside law firms, about the pretexting investigation and possible legal liability for the company over it.
The scandal became public Sept. 6 when HP filed a notice with the U.S. Securities and Exchange Commission acknowledging that director Thomas Perkins resigned over the way the leak investigation was conducted.
"The August 25 transaction does not appear to be part of any prescheduled program," the congressmen wrote in their letter to Hurd. "Please explain the reason for this transaction."
Questions about the timing of HP executives' stock trades around the same time are also the subject of a shareholder lawsuit against the technology company. The suit, filed Nov. 29 in Santa Clara County Superior Court in California, accuses Hurd and seven other HP executives of selling a total $41.3 million worth of shares between Aug. 21 and Sept. 6 based on insider information that the pretexting scandal was about to become publicly known.
HP issued a statement at the time the lawsuit was filed calling it "baseless."
As it is, HP's stock price wasn't adversely affected by the scandal as investors regarded it as unrelated to the company's operations.
