In re HEWLETT-PACKARD
summary
Hewlett-Packard violated SEC reporting rules by failing to disclose that director Thomas Perkins resigned in protest over the company’s controversial investigation and attempt to force out another board member, leading to a cease-and-desist order without admission of guilt.
paragraph
Hewlett-Packard (HP) failed to comply with SEC Regulation S-K Item 5.02(a) by filing a Form 8-K that misclassified director Thomas Perkins’ May 2006 resignation as a non-disagreement event (Item 5.02(b)), despite his public objections to the board’s handling of a leak investigation and its decision to publicly pressure another director to resign. The SEC found that HP omitted material facts about the governance dispute, denied Perkins the opportunity to review or respond to the disclosure, and violated Section 13(a) of the Exchange Act and Rule 13a-11. As a result, the SEC issued a cease-and-desist order against HP, which consented to the order without admitting or denying the findings.
narrative
In May 2006, Hewlett-Packard’s Board of Directors learned the results of an internal investigation into boardroom leaks and voted to request the resignation of a director believed to have disclosed confidential information to the press. Director Thomas Perkins, who had believed the matter would be handled privately and without public exposure, strongly objected to this approach, announced his resignation during the meeting, and walked out in protest. Despite this clear disagreement over corporate governance and policy, HP filed a Form 8-K reporting Perkins’ resignation under Item 5.02(b)—which applies to resignations without disagreement—thereby concealing the material dispute and violating Section 13(a) of the Exchange Act and Rule 13a-11. HP also failed to provide Perkins with a copy of the filing or an opportunity to respond, as required by SEC rules. The Securities and Exchange Commission initiated cease-and-desist proceedings, finding that HP’s omissions misled investors about the nature of the board’s internal conflict. HP consented to the SEC’s order without admitting or denying the findings, acknowledging only the Commission’s jurisdiction and the factual basis of the violation. The order required HP to cease and desist from future violations of securities reporting obligations regarding director resignations and disagreements.
Classified unregistered-securities(confidence 100%). EDGAR detection: forms Form D/S-1· recall 41% / precision 30%. detection rule →
Statutes
SECTION 21C OF THE SECURITIES EXCHANGE ACTRule 13a-11
Parties
Securities and Exchange CommissionHewlett-Packard Company
Keywords
boarddirectorcompanyperkinsdisagreementexchangecommissionleak investigationsecurities exchangedisagreement companymatterresignationinvestigationleakdisclose
Extracted insights
Entities 6
- company cease-and-desist proceedings against hewlett-packard company
- company hewlett-packard company
- person hp common stock
- company public company
- agency Securities and Exchange Commission
- person thomas perkins
Triples 9
- Securities And Exchange Commission instituted cease-and-desist proceedings against Hewlett-Packard Company
- Hewlett-Packard Company failed to disclose circumstances surrounding board member Thomas Perkins' resignation
- HP Board Of Directors voted to request resignation director believed to have violated HP policies by providing confidential information
- Thomas Perkins announced resignation from HP Board of Directors on May 18, 2006
- Thomas Perkins voiced objections to handling of leak investigation matter
- Hewlett-Packard Company is headquartered in Palo Alto, California
- HP common stock is listed on New York Stock Exchange under symbol HPQ
- Public company must file Form 8-K when director resigns from board
- Public company must disclose circumstances of director disagreement on matters relating to operations, policies, or practices
PDF
Text layers
Extracted body text (12,697c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55801 / May 23, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12643
In the Matter of
HEWLETT-PACKARD
COMPANY,
Respondent.
ORDER INSTITUTING CEASE-AND-DESIST
PROCEEDINGS, MAKING FINDINGS, AND
IMPOSING A CEASE-AND-DESIST ORDER
PURSUANT TO SECTION 21C OF THE
SECURITIES EXCHANGE ACT OF 1934
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities
Exchange Act of 1934 (“Exchange Act”), against Hewlett-Packard Company (“HP,” “Hewlett-
Packard,” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the findings
herein, except as to the Commission’s jurisdiction over Respondent and the subject matter of these
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to
Section 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds that:
2
A. Summary
1. This matter involves Hewlett-Packard’s failure to disclose the circumstances
surrounding a board member’s resignation amidst the company’s controversial investigation into
boardroom leaks. On May 18, 2006, HP’s Board of Directors learned the findings of the
company’s leak investigation and voted to request the resignation of a director believed to have
violated HP’s policies by providing confidential information to the press. Silicon Valley venture
capitalist and fellow director Thomas Perkins (not the source of the leak) voiced his strong
objections to the handling of the matter, announced his resignation, and walked out of the Board
meeting. Contrary to the reporting requirements of the federal securities laws, HP failed to
disclose to investors the circumstances of Mr. Perkins’ disagreement with the company.
B. Respondent
2. Hewlett-Packard is a Delaware corporation headquartered in Palo Alto, California.
HP sells computers, computer equipment, and support services. HP’s common stock is registered
with the Commission pursuant to Section 12(b) of the Exchange Act and is listed on the New York
Stock Exchange under the stock symbol “HPQ.”
C. Facts
Legal Background
3. Under the Exchange Act, a public company must file with the Commission a
report on Form 8-K when a director resigns from the board. If a director has resigned because of
a disagreement with the company, known to an executive officer, on any matter relating to the
company’s operations, policies, or practices, the company must, among other things, disclose a
brief description of the circumstances of the disagreement. In addition, the company must give
the director the opportunity to timely review and respond to the company’s disclosure about the
director’s resignation, and the company is required to file any letter written by the director to the
company in response to the company’s disclosure. Absent such a disagreement, the company
must report the resignation, but need not provide the reasons.
HP’s Leak Investigation
4. In or around January 2006, in response to apparent unauthorized disclosures of
confidential information about HP Board meetings to the press, HP initiated an investigation to
determine the source of the leaks. HP Board member Thomas Perkins, Chairman of the Board’s
Nominating and Governance Committee (which was responsible for, among other things,
establishing board member qualifications and evaluating board operations), was generally
informed of the inquiry. Mr. Perkins believed that he and HP’s Chairman had agreed that, upon
completion of the investigation, they would approach any individual implicated privately, obtain an
assurance that it would not happen again, and inform the full Board that the matter had been
resolved without identifying the source of the leak.
3
5. By April 2006, HP investigators tentatively concluded that a long-standing HP
director had leaked information in connection with a January 23, 2006 press article. After
consulting with HP’s Chief Executive Officer, General Counsel, outside counsel, and Chairman of
the Audit Committee, the Chairman of the Board determined that the leak investigation findings
should be presented to the full Board.
Mr. Perkins Resigns During the May 18, 2006 Board Meeting
6. HP’s Board of Directors met beginning at 12:30 p.m. on May 18, 2006 at HP’s
headquarters in Palo Alto, California. All but one of the directors attended, including the CEO
(who is a director), as did the company’s General Counsel (acting as the Board secretary).
7. At the start of the meeting, the head of HP’s Audit Committee discussed the leak
investigation and its findings. After some discussion, the identity of the director who provided
information for the January 2006 article was revealed. The director addressed the Board, explained
his actions, and left the room to permit additional deliberations. The Board discussed HP’s policy
on unauthorized public disclosures, and considered measures that could be taken in response to the
director’s actions, including asking him to resign.
8. During the course of the Board’s deliberations, which lasted approximately 90
minutes, Mr. Perkins voiced his strong objections to the manner in which the matter was being
handled. Among other things, he repeatedly told the Board that the source of the leak should have
been approached “off-line” for an explanation and a warning, rather than identified to the whole
Board. He affirmed his belief that the matter should have been handled confidentially by the
Chairman of the Board and himself as Chairman of the Nominating and Governance Committee.
He also questioned the wisdom of requesting the director to resign over what he perceived to be a
relatively minor offense, noting that the director had made significant contributions to HP.
9. After a lengthy and heated discussion, the Board, by a secret written ballot, passed a
motion to ask the director to resign from the Board. When HP’s General Counsel announced the
results of the vote on whether to ask the director to resign, Mr. Perkins continued to voice
disagreement. As noted in the Board minutes, Mr. Perkins “restated his strong objections to the
process, specifically [the Chairman’s] decision to bring the matter to the full Board and the manner
in which the meeting was conducted.” Mr. Perkins then resigned from the Board and departed the
meeting at approximately 2:00 p.m. The director identified by the leak investigation was asked to
resign following the vote, but declined to resign at that time.
HP Fails to Disclose the Reasons for Mr. Perkins’ Resignation
10. HP executives understood that, in the event a director resigned over a disagreement
with the company on a matter relating to its operations, policies, or practices, the company would
need to report to the Commission (and thereby disclose to investors) the circumstances of the
disagreement.
4
11. On May 22, 2006, HP filed a report on Form 8-K, pursuant to Item 5.02(b),
reporting Mr. Perkins’ resignation, but did not comply with Item 5.02(a) by failing to disclose that
there had been a disagreement with the company. HP also filed with the Form 8-K a May 19
press release, which announced that Mr. Perkins had resigned without disclosing the circumstances
of his disagreement.
12. HP concluded, with the advice of outside legal counsel and the General Counsel,
that it need not disclose the reasons for Mr. Perkins’ resignation because he merely had a
disagreement with the company’s Chairman, and not a disagreement with the company on a matter
relating to its operations, policies, or practices. Contrary to HP’s conclusion, the disagreement
and the reasons for Mr. Perkins’ resignation should have been disclosed, pursuant to Item 5.02(a),
in the May 22 Form 8-K. Mr. Perkins resigned as a result of a disagreement with HP on the
following matters: (1) the decision to present the leak investigation findings to the full Board; and
(2) the decision by majority vote of the Board of Directors to ask the director identified in the leak
investigation to resign. Mr. Perkins’ disagreement related to important corporate governance
matters and HP policies regarding handling sensitive information, and thus constituted a
disagreement over HP’s operations, policies or practices.
13. HP did not disclose further information relating to Mr. Perkins’ resignation until
September 6, 2006, after Mr. Perkins (and the staff of the Securities and Exchange Commission)
had begun to raise questions about the adequacy of the company’s disclosures.
D. Violations
14. Section 13(a) of the Exchange Act and Rule 13a-11 promulgated thereunder
require issuers of securities registered pursuant to Section 12 of the Exchange Act to file with the
Commission current reports on Form 8-K upon the occurrence of certain events, including the
departure of directors or principal officers. Item 5.02(a) of Form 8-K specifies that if a director
has resigned because of a disagreement with the registrant, known to an executive officer of the
registrant, on any matter relating to the registrant’s operations, policies, or practices, the
registrant must, among other things, disclose a brief description of the circumstances
representing the disagreement that the registrant believes caused, in whole or in part, the
director’s resignation. In addition, the registrant must provide the resigning director with a copy
of the disclosure no later than the day the company files the disclosure with the Commission.
Also, the registrant must provide the director with the opportunity to furnish a response letter
stating whether the director agrees with the disclosure in the registrant’s Form 8-K. In the event
that the registrant receives a response letter from the former director, the letter must be filed by the
registrant as an amendment to its Form 8-K within two business days of its receipt. No showing of
scienter is required to establish a violation of Section 13(a) of the Exchange Act.
SEC v. Savoy,
587 F.2d 1149, 1167 (D.C. Cir. 1978).
15. On May 18, 2006, director Thomas Perkins resigned because of a disagreement
with HP regarding the decision to present the leak investigation findings to the full Board and the
decision by the Board to ask the director identified in the leak investigation to resign. The
disagreement was known to HP executive officers. Mr. Perkins’ disagreement with HP related to
5
the operations, policies, or practices of HP. Consequently, HP was required by Item 5.02(a) of
Form 8-K to disclose a brief description of the circumstances representing the disagreement, and
was required to provide Mr. Perkins with a copy of this disclosure no later than the day of filing.
By disclosing the resignation of Mr. Perkins pursuant to Item 5.02(b) in a Form 8-K filed on May
22, 2006, HP failed to disclose the circumstances of Mr. Perkins’ disagreement with HP and also
failed to provide the director with a copy of such a filing. As a result, HP violated Section 13(a) of
the Exchange Act and Rule 13a-11 thereunder.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent HP’s Offer.
Accordingly, it is hereby ORDERED that Respondent HP cease and desist from committing
or causing any violations and any future violations of Section 13(a) of the Exchange Act and Rule
13a-11 thereunder.
By the Commission.
Nancy M. Morris
Secretary OCR text (12,442c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 55801 / May 23, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12643
In the Matter of
HEWLETT-PACKARD
COMPANY,
Respondent.
ORDER INSTITUTING CEASE-AND-DESIST
PROCEEDINGS, MAKING FINDINGS, AND
IMPOSING A CEASE-AND-DESIST ORDER
PURSUANT TO SECTION 21C OF THE
SECURITIES EXCHANGE ACT OF 1934
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities
Exchange Act of 1934 (“Exchange Act”), against Hewlett-Packard Company (“HP,” “Hewlett-
Packard,” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the findings
herein, except as to the Commission’s jurisdiction over Respondent and the subject matter of these
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to
Section 21C of the Securities Exchange Act of 1934 (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds that:
2
A. Summary
1. This matter involves Hewlett-Packard’s failure to disclose the circumstances
surrounding a board member’s resignation amidst the company’s controversial investigation into
boardroom leaks. On May 18, 2006, HP’s Board of Directors learned the findings of the
company’s leak investigation and voted to request the resignation of a director believed to have
violated HP’s policies by providing confidential information to the press. Silicon Valley venture
capitalist and fellow director Thomas Perkins (not the source of the leak) voiced his strong
objections to the handling of the matter, announced his resignation, and walked out of the Board
meeting. Contrary to the reporting requirements of the federal securities laws, HP failed to
disclose to investors the circumstances of Mr. Perkins’ disagreement with the company.
B. Respondent
2. Hewlett-Packard is a Delaware corporation headquartered in Palo Alto, California.
HP sells computers, computer equipment, and support services. HP’s common stock is registered
with the Commission pursuant to Section 12(b) of the Exchange Act and is listed on the New York
Stock Exchange under the stock symbol “HPQ.”
C. Facts
Legal Background
3. Under the Exchange Act, a public company must file with the Commission a
report on Form 8-K when a director resigns from the board. If a director has resigned because of
a disagreement with the company, known to an executive officer, on any matter relating to the
company’s operations, policies, or practices, the company must, among other things, disclose a
brief description of the circumstances of the disagreement. In addition, the company must give
the director the opportunity to timely review and respond to the company’s disclosure about the
director’s resignation, and the company is required to file any letter written by the director to the
company in response to the company’s disclosure. Absent such a disagreement, the company
must report the resignation, but need not provide the reasons.
HP’s Leak Investigation
4. In or around January 2006, in response to apparent unauthorized disclosures of
confidential information about HP Board meetings to the press, HP initiated an investigation to
determine the source of the leaks. HP Board member Thomas Perkins, Chairman of the Board’s
Nominating and Governance Committee (which was responsible for, among other things,
establishing board member qualifications and evaluating board operations), was generally
informed of the inquiry. Mr. Perkins believed that he and HP’s Chairman had agreed that, upon
completion of the investigation, they would approach any individual implicated privately, obtain an
assurance that it would not happen again, and inform the full Board that the matter had been
resolved without identifying the source of the leak.
3
5. By April 2006, HP investigators tentatively concluded that a long-standing HP
director had leaked information in connection with a January 23, 2006 press article. After
consulting with HP’s Chief Executive Officer, General Counsel, outside counsel, and Chairman of
the Audit Committee, the Chairman of the Board determined that the leak investigation findings
should be presented to the full Board.
Mr. Perkins Resigns During the May 18, 2006 Board Meeting
6. HP’s Board of Directors met beginning at 12:30 p.m. on May 18, 2006 at HP’s
headquarters in Palo Alto, California. All but one of the directors attended, including the CEO
(who is a director), as did the company’s General Counsel (acting as the Board secretary).
7. At the start of the meeting, the head of HP’s Audit Committee discussed the leak
investigation and its findings. After some discussion, the identity of the director who provided
information for the January 2006 article was revealed. The director addressed the Board, explained
his actions, and left the room to permit additional deliberations. The Board discussed HP’s policy
on unauthorized public disclosures, and considered measures that could be taken in response to the
director’s actions, including asking him to resign.
8. During the course of the Board’s deliberations, which lasted approximately 90
minutes, Mr. Perkins voiced his strong objections to the manner in which the matter was being
handled. Among other things, he repeatedly told the Board that the source of the leak should have
been approached “off-line” for an explanation and a warning, rather than identified to the whole
Board. He affirmed his belief that the matter should have been handled confidentially by the
Chairman of the Board and himself as Chairman of the Nominating and Governance Committee.
He also questioned the wisdom of requesting the director to resign over what he perceived to be a
relatively minor offense, noting that the director had made significant contributions to HP.
9. After a lengthy and heated discussion, the Board, by a secret written ballot, passed a
motion to ask the director to resign from the Board. When HP’s General Counsel announced the
results of the vote on whether to ask the director to resign, Mr. Perkins continued to voice
disagreement. As noted in the Board minutes, Mr. Perkins “restated his strong objections to the
process, specifically [the Chairman’s] decision to bring the matter to the full Board and the manner
in which the meeting was conducted.” Mr. Perkins then resigned from the Board and departed the
meeting at approximately 2:00 p.m. The director identified by the leak investigation was asked to
resign following the vote, but declined to resign at that time.
HP Fails to Disclose the Reasons for Mr. Perkins’ Resignation
10. HP executives understood that, in the event a director resigned over a disagreement
with the company on a matter relating to its operations, policies, or practices, the company would
need to report to the Commission (and thereby disclose to investors) the circumstances of the
disagreement.
4
11. On May 22, 2006, HP filed a report on Form 8-K, pursuant to Item 5.02(b),
reporting Mr. Perkins’ resignation, but did not comply with Item 5.02(a) by failing to disclose that
there had been a disagreement with the company. HP also filed with the Form 8-K a May 19
press release, which announced that Mr. Perkins had resigned without disclosing the circumstances
of his disagreement.
12. HP concluded, with the advice of outside legal counsel and the General Counsel,
that it need not disclose the reasons for Mr. Perkins’ resignation because he merely had a
disagreement with the company’s Chairman, and not a disagreement with the company on a matter
relating to its operations, policies, or practices. Contrary to HP’s conclusion, the disagreement
and the reasons for Mr. Perkins’ resignation should have been disclosed, pursuant to Item 5.02(a),
in the May 22 Form 8-K. Mr. Perkins resigned as a result of a disagreement with HP on the
following matters: (1) the decision to present the leak investigation findings to the full Board; and
(2) the decision by majority vote of the Board of Directors to ask the director identified in the leak
investigation to resign. Mr. Perkins’ disagreement related to important corporate governance
matters and HP policies regarding handling sensitive information, and thus constituted a
disagreement over HP’s operations, policies or practices.
13. HP did not disclose further information relating to Mr. Perkins’ resignation until
September 6, 2006, after Mr. Perkins (and the staff of the Securities and Exchange Commission)
had begun to raise questions about the adequacy of the company’s disclosures.
D. Violations
14. Section 13(a) of the Exchange Act and Rule 13a-11 promulgated thereunder
require issuers of securities registered pursuant to Section 12 of the Exchange Act to file with the
Commission current reports on Form 8-K upon the occurrence of certain events, including the
departure of directors or principal officers. Item 5.02(a) of Form 8-K specifies that if a director
has resigned because of a disagreement with the registrant, known to an executive officer of the
registrant, on any matter relating to the registrant’s operations, policies, or practices, the
registrant must, among other things, disclose a brief description of the circumstances
representing the disagreement that the registrant believes caused, in whole or in part, the
director’s resignation. In addition, the registrant must provide the resigning director with a copy
of the disclosure no later than the day the company files the disclosure with the Commission.
Also, the registrant must provide the director with the opportunity to furnish a response letter
stating whether the director agrees with the disclosure in the registrant’s Form 8-K. In the event
that the registrant receives a response letter from the former director, the letter must be filed by the
registrant as an amendment to its Form 8-K within two business days of its receipt. No showing of
scienter is required to establish a violation of Section 13(a) of the Exchange Act. SEC v. Savoy,
587 F.2d 1149, 1167 (D.C. Cir. 1978).
15. On May 18, 2006, director Thomas Perkins resigned because of a disagreement
with HP regarding the decision to present the leak investigation findings to the full Board and the
decision by the Board to ask the director identified in the leak investigation to resign. The
disagreement was known to HP executive officers. Mr. Perkins’ disagreement with HP related to
5
the operations, policies, or practices of HP. Consequently, HP was required by Item 5.02(a) of
Form 8-K to disclose a brief description of the circumstances representing the disagreement, and
was required to provide Mr. Perkins with a copy of this disclosure no later than the day of filing.
By disclosing the resignation of Mr. Perkins pursuant to Item 5.02(b) in a Form 8-K filed on May
22, 2006, HP failed to disclose the circumstances of Mr. Perkins’ disagreement with HP and also
failed to provide the director with a copy of such a filing. As a result, HP violated Section 13(a) of
the Exchange Act and Rule 13a-11 thereunder.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent HP’s Offer.
Accordingly, it is hereby ORDERED that Respondent HP cease and desist from committing
or causing any violations and any future violations of Section 13(a) of the Exchange Act and Rule
13a-11 thereunder.
By the Commission.
Nancy M. Morris
Secretary
UNITED STATES OF AMERICA
In the Matter of
HEWLETT-PACKARD COMPANY,
Respondent.
IV.