Press Release: SEC Settles Charges Against Hewlett-Packard for Misleading Disclosures Arising Out of Company’s Boardroom Leak Investigation (Press Release No. 2007-103; May 23, 2007)
The SEC charged Hewlett-Packard with failing to disclose that Director Thomas Perkins resigned in May 2006 due to a disagreement over the company’s boardroom leak investigation and pressure on another director to step down, violating federal securities disclosure rules, leading to a cease-and-desist order without monetary penalty.
In May 2006, Hewlett-Packard (HP) pressured a board member to resign following an internal investigation into leaks of confidential board information, which included unauthorized acquisition of phone records. Director Thomas Perkins objected to the manner of the investigation and the governance decisions made during a heated board meeting, leading to his abrupt resignation. Despite federal securities laws requiring disclosure of such disagreements over corporate operations or policies, HP publicly reported only that Perkins had stepped down, omitting the substantive conflict; the SEC found this violated the Securities Exchange Act of 1934, and HP agreed to a cease-and-desist order without admitting or denying the allegations or paying a fine.
In early 2006, Hewlett-Packard launched an investigation into leaks of confidential boardroom information to the press, which later involved the unauthorized acquisition of phone records to identify sources. By April 2006, investigators concluded one director was responsible, prompting senior executives to present findings to the full Board. During a contentious meeting on May 18, 2006, the Board voted to ask that director to resign, prompting Thomas Perkins, another board member, to strongly object to the process and governance practices, leading to his immediate resignation. Federal securities laws required HP to disclose the nature of Perkins’ disagreement, as it related to corporate governance and handling of sensitive information—matters affecting company operations. Instead, HP issued a public statement merely noting his resignation, omitting any reference to the dispute or investigative tactics. The SEC determined this omission violated the reporting requirements of the Securities Exchange Act of 1934, as it deprived investors of material information about board-level conflicts. Without admitting or denying the allegations, HP consented to a cease-and-desist order, with no monetary penalty imposed, but the case reinforced the SEC’s stance that transparency in board disputes is essential for investor protection.
Exhibits & Attached Documents (1)
Extracted insights
- company disclosures regarding perkins' disagreement with company
- company hewlett-packard company
- person hp board
- person hp investigators
- agency Securities and Exchange Commission
- person thomas perkins
- SEC filed settled charges against Hewlett-Packard Company for failing to disclose reasons for director's resignation
- Hewlett-Packard Company failed to disclose reasons for director's abrupt resignation in midst of boardroom leak investigation
- Hewlett-Packard initiated investigation into leaks of confidential information about HP Board meetings to the press in early 2006
- HP investigators concluded one of HP's directors was responsible for leaks by April 2006
- HP Board voted to ask director to resign on May 18, 2006
- Thomas Perkins voiced objections to manner of leak investigation presentation and decision to ask director to resign
- Thomas Perkins resigned from HP Board on May 18, 2006
- Hewlett-Packard did not make mandated disclosures regarding Perkins' disagreement with company
- SEC found Perkins' disagreement related to HP's corporate governance and policies regarding handling of sensitive information
- Hewlett-Packard violated public reporting requirements of Securities Exchange Act of 1934
- Hewlett-Packard consented to order to cease and desist from committing violations of Securities Exchange Act provisions
SEC Settles Charges Against Hewlett-Packard for Misleading Disclosures Arising Out of Company’s Boardroom Leak Investigation FOR IMMEDIATE RELEASE 2007-103 Washington, D.C., May 23, 2007 — The Securities and Exchange Commission today filed settled administrative charges against Hewlett-Packard Company for failing to disclose the reasons for a director’s abrupt resignation in the midst of HP’s controversial investigation into boardroom leaks. The Commission found that several months before the public revelation of the company’s leak investigation, an HP director objected to the company’s handling of the matter and resigned from the Board, yet HP failed to disclose the reasons for his resignation as required by federal securities laws. As described in the Commission’s order, in early 2006 HP initiated an investigation into leaks of confidential information about HP Board meetings to the press. By April, HP investigators had concluded one of HP’s directors was responsible, and the company’s Chairman and several senior executives decided to present the findings to the Board. During the course of a lengthy and heated Board meeting on May 18, 2006, the Board voted to ask the director to resign. According to the Commission, fellow Board member Thomas Perkins (who was not the director asked to resign) voiced strong objections to the manner in which the leak investigation findings were presented to the Board and to the decision to ask the director to resign. For these reasons, Perkins resigned from the Board and left the meeting. Federal securities laws require a public company to disclose – by making a public filing with the Commission – the circumstances of the disagreement if a director resigns because of a disagreement with the company on any matter relating to its operations, policies or practices. Notwithstanding this requirement, HP did not make the mandated disclosures, instead reporting only the fact that Mr. Perkins had stepped down. The Commission found Mr. Perkins’ disagreement related to HP’s corporate governance and HP’s policies regarding the handling of sensitive information, and therefore was a disagreement related to HP’s operations, policies or practices which was required to be disclosed. Linda Chatman Thomsen, Director of the Commission’s Division of Enforcement, said, “This action highlights the importance of the required disclosures regarding corporate governance issues. The Federal securities laws exist to ensure transparency, and investors have a right to know when a dispute among board members over operations, policies or practices causes a director to resign, as such a dispute may have far-reaching ramifications for the company.” Marc Fagel, Associate Regional Director of the Commission’s San Francisco Regional Office, added, “The company viewed this as a personal dispute between a director and the Chairman and opted to stay silent about the disagreement. But the failure to make the required disclosures deprived investors of important information about the management of the company by its Board of Directors.” The Commission’s Order charges HP with violating the public reporting requirements of the Securities Exchange Act of 1934. Without admitting or denying the Commission’s findings, HP consented to an order that it cease and desist from committing or causing violations of these provisions. For more information, contact: Marc J. Fagel Associate Regional Director (415) 705-2449 Cary Robnett Assistant Regional Director (415) 705-2335 San Francisco Regional Office Securities and Exchange Commission Additional materials: Administrative Proceeding Release No. 34-55801 http://www.sec.gov/news/press/2007/2007-103.htm Home | Previous Page Modified: 05/23/2007
SEC Settles Charges Against Hewlett-Packard for Misleading Disclosures Arising Out of Company’s Boardroom Leak Investigation FOR IMMEDIATE RELEASE 2007-103 Washington, D.C., May 23, 2007 — The Securities and Exchange Commission today filed settled administrative charges against Hewlett-Packard Company for failing to disclose the reasons for a director’s abrupt resignation in the midst of HP’s controversial investigation into boardroom leaks. The Commission found that several months before the public revelation of the company’s leak investigation, an HP director objected to the company’s handling of the matter and resigned from the Board, yet HP failed to disclose the reasons for his resignation as required by federal securities laws. As described in the Commission’s order, in early 2006 HP initiated an investigation into leaks of confidential information about HP Board meetings to the press. By April, HP investigators had concluded one of HP’s directors was responsible, and the company’s Chairman and several senior executives decided to present the findings to the Board. During the course of a lengthy and heated Board meeting on May 18, 2006, the Board voted to ask the director to resign. According to the Commission, fellow Board member Thomas Perkins (who was not the director asked to resign) voiced strong objections to the manner in which the leak investigation findings were presented to the Board and to the decision to ask the director to resign. For these reasons, Perkins resigned from the Board and left the meeting. Federal securities laws require a public company to disclose – by making a public filing with the Commission – the circumstances of the disagreement if a director resigns because of a disagreement with the company on any matter relating to its operations, policies or practices. Notwithstanding this requirement, HP did not make the mandated disclosures, instead reporting only the fact that Mr. Perkins had stepped down. The Commission found Mr. Perkins’ disagreement related to HP’s corporate governance and HP’s policies regarding the handling of sensitive information, and therefore was a disagreement related to HP’s operations, policies or practices which was required to be disclosed. Linda Chatman Thomsen, Director of the Commission’s Division of Enforcement, said, “This action highlights the importance of the required disclosures regarding corporate governance issues. The Federal securities laws exist to ensure transparency, and investors have a right to know when a dispute among board members over operations, policies or practices causes a director to resign, as such a dispute may have far-reaching ramifications for the company.” Marc Fagel, Associate Regional Director of the Commission’s San Francisco Regional Office, added, “The company viewed this as a personal dispute between a director and the Chairman and opted to stay silent about the disagreement. But the failure to make the required disclosures deprived investors of important information about the management of the company by its Board of Directors.” The Commission’s Order charges HP with violating the public reporting requirements of the Securities Exchange Act of 1934. Without admitting or denying the Commission’s findings, HP consented to an order that it cease and desist from committing or causing violations of these provisions. For more information, contact: Marc J. Fagel Associate Regional Director (415) 705-2449 Cary Robnett Assistant Regional Director (415) 705-2335 San Francisco Regional Office Securities and Exchange Commission Additional materials: Administrative Proceeding Release No. 34-55801 http://www.sec.gov/news/press/2007/2007-103.htm Home | Previous Page Modified: 05/23/2007