Just when you thought the Hewlett-Packard drama had died down, regulators have begun investigating the circumstances surrounding Mark Hurd's sudden departure as president and CEO of HP.
The Wall Street Journal first reported the Securities and Exchange Commission's probe. The Journal cited anonymous sources saying the SEC is investigating claims that Hurd shared insider information with an ex-contractor before the company acquired Electronic Data Systems for $13.9 billion in 2008.
Hurd resigned suddenly in the wake of an investigation into his relationship with a former actress named Jodie Fisher, who accused Hurd of sexual harassment. A company investigation cleared Hurd of any wrongdoing with Fischer, but Hurd resigned, saying there were instances in which he "did not live up to the standards and principles of trust, respect and integrity" that he espoused at HP. Hurd is now a president at Oracle.
A Busy SEC
The SEC's investigation doesn't surprise Charles King, principal analyst at Pund-IT. Between Hurd's original $40 million sweetheart deal -- later reduced after shareholders screamed bloody murder -- and several resulting investor lawsuits, there's plenty for the SEC to investigate, he said.
"Additionally, as the melodrama around HP, Hurd and Jodie Fisher was spinning out, one rumor that appeared late in the day was that Hurd had spoken out of school to Fisher about the then-in-progress EDS acquisition," King said. "Such allegations are far more serious than the harassment and expense fudging Hurd was accused of, and, if correct, would be a natural target for the SEC."
No Worries for Shareholders
What about HP clients and shareholders? Should they be concerned? King doesn't think so, but then again it depends on whom or on what the probe focuses.
If the primary target is Hurd and allegations about leaking information about the EDS deal, King said, the company can note that it acted quickly and forcefully to rid itself of an obvious bad apple.
But if the SEC decides to look under the hood of Hurd's $40 million initial deal, King said, the HP board may come under fire. At this point, King said, the leak issue seems highest on the SEC radar.
Hurd's Possible Fate
If Hurd is found guilty of the leak, it could spell trouble for him. The most comparable recent situation is probably Bob Moffat, the former senior IBM executive who was found guilty of leaking inside information to a hedge-fund manager with whom he was reportedly having an affair. King pointed to Moffat's fate as a potential repercussion. Moffat is doing six months in jail for his infractions, which seems like a light sentence, but his career in IT is effectively over.
"If the SEC investigation bears similar results for Hurd, the finale will likely be similar -- though one could argue that telling tales to a former actress is less iniquitous than whispering sweet nothings to a hedge-fund manager," King said.
"Hurd hasn't been at Oracle long enough for the company to sustain a major business hit if the SEC probe results in prosecution and a guilty verdict. But if that's the case, [Oracle CEO] Larry Ellison's over-top-defense of Hurd and criticism of the HP board, plus his decision to place Hurd in so high-profile a position at Oracle, would have to be considered a major embarrassment by any reasonable measure."
Posted: 2010-12-21 @ 2:09pm PT
"Hurd resigned, saying there were instances in which he "did not live up to the standards and principles of trust, respect and integrity" that he espoused at HP. Hurd is now a president at Oracle." Hilarious!!! Oracle is where he belongs if that's his M.O.!