HP faces expanded civil lawsuit in spying case

A shareholder lawsuit against Hewlett-Packard Co. (HP) for attempting to spy on board members and reporters has been expanded to include charges of insider stock trading.

An amended complaint filed Wednesday in the Superior Court of California for Santa Clara County accuses HP Chairman and Chief Executive Officer Mark Hurd and seven other company executives of selling $41.3 million worth of HP stock at "inflated prices" shortly before the company revealed that its investigators had used questionable and possibly illegal techniques to gain access to personal records such as phone call logs.

The eight executives sold 1.7 million shares of stock between Aug. 21 and Sept. 6, according to the lawsuit. In an Aug. 31 filing with the U.S. Securities and Exchange Commission (SEC), HP said an outside investigator used the practice of pretexting, pretending to be someone else, to gain access to personal records.

Former HP Chairman Patricia Dunn and four others face criminal charges stemming from their alleged participation in the spying, which also used e-mail tracer technology, according to testimony before a U.S. congressional committee.

HP also tried to prop up the value of its stock price by announcing on Aug. 21 it would repurchase $6 billion worth of its stock, the lawsuit says.

"In the midst of this acrimony HP executives cashed in," says the complaint, filed by the Lerach, Coughlin, Stoia, Geller, Rudman & Robbins LLP law firm.

HP issued a statement calling the lawsuit "baseless." The lawsuit "represents a transparent effort to exploit issues related to HP's recent investigation for personal gain at the expense of HP, its shareholders and its employees," the statement said. "HP will defend itself vigorously."

HP acknowledged that it had obtained the phone records of 12 people by using pretexting.

The stockholder lawsuit, originally filed in September, asks the court to declare that HP's executives have "committed breaches of their fiduciary duties" and to order executives to repay the amount the company has been damaged by the spying scandal. The lawsuit also asks the court to require HP to reform its corporate governance and to extract punitive damages from Dunn, Hurd and other HP executives.