SEC's reported probe of Hurd hinges on one thing

Former HP CEO faces questions over insider trading, false expense reports, destroying evidence

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The "information investigation" by the U.S. Securities and Exchange Commission into events surround the departure last summer of Mark Hurd as chief executive of Hewlett-Packard sounds serious, at least at first glance.

The SEC is looking into allegations that the former HP CEO shared insider information with an HP event hostess in 2008, according to the Wall Street Journal.

That hostess was Jodie Fisher, whose claims of sexual harassment hastened Hurd's exit from the company in August. He soon after joined Oracle as co-president. While an internal probe cleared Hurd of the harassment allegations, HP determined its CEO had submitted fake expense reports to cover up his alleged relationship with Fisher.

It's hard to figure where this is all going to go. Granted, the smart money would predict the usual scenario: The SEC questions a lot of witnesses, writes a lengthy report and calls a press conference to announce it is 1) filing no case, or 2) reaching a settlement that will result in a nominal fine along with a stern lecture about corporate ethics.

But there's a wild card in this case, and that's Fisher. She's the one to whom Hurd in March 2008 supposedly passed along insider information about HP's $13.9 billion purchase of Electronic Data Systems. HP announced the deal publicly two months later.

Fisher reached a private settlement with Hurd in August over the sexual harassment allegations.

The issue regarding Hurd supposedly altering expense reports is minor relative to insider trading. Thus this probe, as the WSJ writes, really boils down to one thing:

Even if the EDS allegation is true, it's unlikely it would result in a case against Mr. Hurd unless Ms. Fisher traded on the information or passed it to someone else who traded on it, according to management lawyers. When she made her initial claim, Ms. Fisher denied trading on the information, according to people briefed on the matter.

So this investigation hinges almost entirely on whether the SEC can prove Fisher placed trades based on what Hurd allegedly told her, or whether someone to whom she passed along the information made a trade. As the WSJ reports, Fisher previously denied placing trades based on anything Hurd allegedly told her about EDS. She's certainly isn't going to turn around now and admit it, even if she did place a trade. Nor are any other people she may have talked to going to stand up and say they engaged in insider trading.

Without willing witnesses and solid evidence -- a paper trail, definitive emails and text messages, recorded phone calls -- the SEC probably won't have much of a case.

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