WRONG AGAIN: The Scandalous Inaccuracy of Pattie Dunn’s Obituaries

It was probably inevitable that most obituaries of Patricia Dunn would stress the front-page scandal that ended her business career in 2006 over the impressive but quieter achievements that preceded it. I wrote a book about this scandal, called “Spygate,“ in which Hewlett-Packard Co. investigators spied on its own directors and executive as well as nine journalists to find out who was leaking confidential information from inside HP’s boardroom. Like Watergate, its namesake, Spygate involved a cover-up that was far more egregious than the original misdeeds. That is, disgruntled director Tom Perkins set in motion an audacious conspiracy that succeeded in scapegoating Dunn, HP’s chairman, for the company’s transgressions. In fact, Dunn had neither authorized nor supervised any of HP’s five leak investigations, but that did not prevent her from being booted off its board, vilified as a corporate spymaster in news accounts worldwide, pilloried by a Congressional committee, and indicted by the state of California.

Dunn’s fall added a shockingly discordant coda to a career that ranked among the most estimable of the baby-boom generation of executive women. Starting as a part-time secretary with no financial background whatsoever, Dunn rose all the way to CEO of Barclays Global Investors as it grew into the largest investment management company in the world. Over three decades, she built a pristine reputation as a conscientious executive who was beloved and admired in equal measure by many of her BGI colleagues. As judged even by the cutthroat standards of big business, the sudden shredding of Pattie Dunn’s reputation seemed grossly unjust.

It is particularly offensive then that so much of what was written about Dunn after her death on Dec. 4 repeated the same erroneous assertion that marred coverage of “Spygate” as breaking news: namely, that Dunn authorized and was ultimately responsible for HP’s errant leak investigations. USA Today, which included Dunn on its annotated list of the most notable business people who died in 2011, succinctly expressed this misconception: “Patricia Dunn, 58, former Hewlett-Packard chairwoman who authorized a surveillance probe that sullied her rise from bank typist to corporate upper class. Cancer.”

The inaccuracy of so many of Dunn’s obituaries seemed to be rooted in a basic misperception of her position at HP. Dunn was named a director of HP in 1998 and was elected chairman in February, 2005, after the board fired Carly Fiorina. In contrast to Fiorina, who also was HP’s chief executive officer, Dunn never held a management position at the company. Newsweek’s depiction of Dunn on its cover as “The Boss Who Spied on Her Board” was wrong on two counts: she did not spy on anyone and she wasn’t the boss. Dunn was HP’s first non-executive chairman and as such not nearly as powerful as her predecessors. As I noted in my book, The Big Lie.: “No one at HP reported to Dunn, who had no authority to hire or fire or incur corporate expenses. She didn’t even have an office at [HP] headquarters, operating out of the study of her chalet-style home in the Orinda Hills.” As non-executive chairman Dunn simply was in no position to authorize or supervise the series of leak investigations that HP’s security and legal departments conducted in 2005 and 2006.

That said, Dunn strongly believed that it was necessary for HP to find out who was spilling boardroom secrets and put a stop to it. “The most sensitive aspects of a company’s business come before its board: strategy, executive succession, acquisitions, business plans, product development, and key supplier relations,” she told a Congressional committee that held hearings on Spygate in September, 2006. “This is exactly the type of information a company’s competitors and those who trade in its stock would love to have before that information becomes public. Boards have an unquestionable obligation to take appropriate steps to prevent this happening.”
Although Dunn’s views were solidly within the bounds of consensus in the business world, many outsiders are suspicious of draconian corporate efforts to restrict and regulate information flow. In her Congressional testimony, Dunn complained that “many supposedly sophisticated business commentators are astonishingly insensitive to the seriousness of the problem [HP’s] board faced. Comments ranging from, ‘Isn’t it okay for directors to leak if they think it’s for the benefit of the company?’ to ‘What’s the big deal? Did any of the leaks actually harm the company?‘ to ‘You can’t stop leaking and what happened at HP shows why you shouldn’t even try,’ reflected profound ignorance of board functioning and fiduciary responsibility.”

Doubts about the underlying rationale of HP’s leak investigations were strongest among journalists, who, after all, have a professional interest in cultivating unauthorized sources within institutions of all sorts, big corporations included. This skepticism informed many Dunn obituaries, most notably a San Jose Mercury News column that claimed that in her determination to “root out the leaker” on the board, she “displayed a paranoia and an obsession that seems completely at odds with the gentle, inspirational person who had gained such widespread admiration.”

The notion that Spygate was the product of a deranged one-woman crusade was not only at odds with Dunn’s tempered personality but with the incontrovertible facts of the matter as laid out in the hundreds of emails and other internal documents that HP supplied in 2006 under subpoena to the Energy and Commerce Committee of the U. S. House of Representatives and to the Office of the Attorney General of California.

Paranoia? The HP paper trail leaves no doubt that leaks were real, they were incessant, and they angered and unnerved the other directors, imperiling Chairman Dunn’s efforts to bring cohesion to a bitterly divided board. (Not to mention the frictions that leaks by directors created with HP management.) On February 14, 2005, just seven days after Dunn was named chairman, an inside scoop published in the Wall Street Journal infuriated even the usually stoical Richard Hackborn, a former HP chairman who had remained one of the board’s most influential members. “This is disgusting!” Hackborn thundered in an email to Dunn. “Either we have a Board member who wants to hurt the rest of us and HP. Or there is a ‘bug’ somewhere in {HP’s] communications network.”

The HP board had become a sieve under Carly Fiorina‘s chairmanship. In fact, her firing was catalyzed by a shockingly well-informed front-page Wall Street Journal story by Pui-Wing Tam, who had been clued into the board’s mounting discontent with its chairman and CEO by a highly placed inside source. Fiorina was outraged–“It’s hard to convey how violated I felt,” she said later–and sealed her fate by indignantly lecturing the directors as if they were unruly school children and she their principal.

In her methodical way, Dunn started her tenure as chairman by meeting individually with each of her fellow directors to sound out their concerns. The consensus was clear: Dunn’s second priority, after leading the search for a new CEO, was “coming to grips with HP’s famously leak board,” the new chairman recalled. “They were particularly disturbed because Carly Fiorina’s attempt to do this had come to naught.” At Fiorina’s insistence, HP’s outside law firm had briefly interrogated each board member after the WSJ had published Tam’s front-page scoop, but had failed to smoke out the culprit. “Thus, directors knew that whoever was talking to the press was unwilling to come forward to make a clean breast of the matter,” Dunn added. “This served only to deepen mutual distrust. Identifying the source of the leaks was seen by many directors as ‘unfinished business’ from [Fiorina‘s] tenure as chairman.’”

Dunn wholeheartedly agreed with her colleagues’ twin priorities, which were effectively fused into one as HP’s CEO search was roiled from beginning to end by leaks to the Wall Street Journal, Business Week and other publications. “We cannot run a successful search in a fishbowl,” Dunn confided in an email to a director who’d opposed Fiorina’s sacking and had decided to quit the board in protest. “On our next board call I plan to hit this one hard: directors cannot speak to ANYONE, period, paragraph, about what happens in the boardroom.” Dunn then met with Larry Sonsini, HP’s outside counsel, to work on a plan to assure the confidentiality of board meetings. “I am looking for your support to do whatever we can within the bounds of ethics and the law to get information under control,” Dunn told her fellow directors.

Dunn also took the advice of a fellow director and drove from her home to HP headquarters in Palo Alto on Feb. 15 to meet with Bob Wayman, HP’s longtime chief financial officer, whom the board had appointed interim CEO after firing Fiorina. Wayman, who for years had overseen HP Global Security in his capacity as CFO, agreed with Dunn and that action was needed to stop the leaks. “We have people who do that for a living here,” Wayman told her. “I‘ll have Kevin Huska talk to you right away.”

Later that same afternoon Dunn met briefly with Huska, who explained that the company routinely dealt with unauthorized disclosures of information and had procedures in place to deal with them. After returning to Orinda, Dunn emailed Hackborn. “I have spoken with the individual at HP who is responsible for executive security and there are a number of steps being taken to try and determine who may have been in touch with the WSJ reporter … In addition, they are doing a complete assessment of information security and will report it out to Bob [Wayman] and me.”

This, the first of five leak investigations that took place while Dunn was chairman, actually began the day before Dunn met with Wayman and Huska. The available documents do not indicate whether it was authorized by Wayman or by someone lower in the pecking order. Clearly, though, it was not Dunn, who had no idea that an HP security operative named Michael Metz was searching the company telephone database for calls to or from Tam at the very time she was meeting with Huska.

The Tam investigation went nowhere and Dunn never did hear back from Huska. Had she truly been obsessed instead of merely determined to halt the boardroom spillage, she would have demanded the report she had been promised and also followed up on Huska‘s parting suggestion that she contact Ron DeLia, the Boston-based investigator who handled most of HP’s leak investigations. (DeLia was nominally an outside contractor, but HP was by far his biggest client and had been for years.) Instead, Dunn let it all slide–and not only because she was distracted by the press of other business. She hadn’t been impressed with Huska, a monosyllabic ex-bodyguard, and did not know enough about HP Security to trust it to investigate thoroughly and objectively. Might it be compromised by corporate politics in ways she knew nothing about?

Not long after meeting Huska, Dunn emailed the other directors to suggest that the board consider instructing management to retain the well-known investigative firm Kroll Associates “to see what they can do, within the bounds of ethics and the law, to track unauthorized press communications.” Dunn was right to be skeptical of HP Security, but she erred in not pushing more forcefully for Kroll’s hiring. In the end, she deferred to Wayman, who wanted to keep the investigation in-house and under management’s direction and opposed enlisting Kroll‘s help.

On March 8, Business Week ran a story that identified the leading candidate for the vacant CEO job as well as naming several other contenders. “The leak to Business Week is awful,” Tom Perkins complained in an email to Dunn. “It may scare [the frontrunner] away and the references to the others are too accurate to be ‘fishing’ guesses.“ Wayman called Dunn to discuss the latest leak, but did not tell her that DeLia already was on the case. DeLia didn’t do much more than send a list of 34 telephone numbers to Action Research Group, a sketchy Florida subcontractor that specialized in obtaining records from telephone carriers using one form of subterfuge or another–an ethically dubious (and now illegal) practice known as “pretexting.” Action Research was able to put a name and an address to all 34 numbers, but to no avail: DeLia was unable to identify Business Week’s inside source.

Investigation number two was where HP started to go seriously wrong, and yet the House committee that looked into Spygate failed even to call Wayman, who was ultimately responsible for both the first and second leak probes. The effect of this glaring oversight was to countenance HP management’s scheme to tie the primary responsibility for the company’s investigative misdeeds to Dunn, whose involvement was greatest in the company‘s third investigation, which was the only one of HP’s five leak probes that Dunn initiated. The House panel let HP get away with this blatant falsehood, even though its staffers possessed abundant documentary evidence that what the company claimed was its first investigation was actually its third.

On March 27, Business Week struck again. The board had just formally offered the CEO job to a dark horse contender: Mark Hurd, the CEO of NCR Corp. BW reporter Peter Burrows called Hurd at home in Dayton, Ohio, and said that he had it on good authority that HP had chosen him to replace Fiorina. Hurd, who was still dickering with the board over the terms of his new position, was so flustered and annoyed by the BW leak that he threatened to turn down the HP job and stay at NCR. “I think we almost lost Mark there,” Dunn said later. Hurd’s hiring was officially announced March 29 and he reported for duty in Palo Alto two days later.

Other unauthorized disclosures would unsettle Hurd‘s first weeks as CEO, prompting him to declare a zero-tolerance media policy: any employee caught speaking to a reporter without company approval would be fired without recourse “Leaks to the press are “reprehensible and unacceptable,” Hurd told a company gathering. “When I find where this comes from, I promise you I will deal with it appropriately.“ In short, HP had a CEO who was at least as serious as was its chairman about information security.

Dunn immediately briefed Hurd on the leaks that had taken place before he joined HP and on her interactions with Wayman and Huska. In mid-April, Hurd urged her to follow up on Huska’s suggestion of two months earlier and contact DeLia. On April 17, Dunn initiated HP’s Security’s third leak investigation by telephoning DeLia and asking him to prepare an investigation proposal focused on the leaks to Business Week. DeLia hopped to it, emailing Dunn a one-page proposal on April 19. DeLia put the cost of the investigation at $35,000 to $50,000. Dunn did not have the authority to pay anyone anything so she brought DeLia’s plan to HP’s ultimate boss, Hurd.

As it happened, Dunn received DeLia’s proposal just a few hours before her first extensive meeting with Hurd in preparation for the next board meeting. Later, after the Spygate scandal had broken and the scapegoating of Dunn was in full swing, Hurd claimed that he had not even been aware of what he called “Dunn’s leak investigation” until July. However, Baskins was also present at the April 19 meeting and the notes that she took clearly indicate that leaks were on the agenda. In fact, Dunn recalled reading aloud much of DeLia’s proposal to Hurd, who reacted favorably, according to Baskins‘ notes: “Media: Discussion and agreement regarding efforts to prevent authorized disclosure of board matters to media.” By her own description, Dunn initiated HP’s third leak investigation, but Hurd authorized it and admitted as much in his testimony before the same House of Representatives committee that grilled Dunn.

The two-day span immediately after Hurd gave his approval marked the high water point of Dunn’s involvement in HP’s leak investigations of 2005-6. Basically, DeLia asked for Dunn’s help in getting his project off the ground and she fully complied, after receiving assurances from DeLia that his investigation would be conducted lawfully and in accordance with HP’s standards of practice. At the investigator’s request, Dunn turned over a comprehensive list of the phone numbers of all the board members, including no less than eight different numbers for herself. In her Congressional testimony, Dunn argued that the matching of legally obtained phone records of directors with the phone numbers of reports who had published leaked information was defensible, given the severity of the board’s security problem.

Whimsically, the chairman also took DeLia up on his suggestion that she name the investigation. “Let’s call this Project Kona,” replied Dunn, who at the time was vacationing in Hawaii on the Kona Coast of the Big Island.

DeLia again turned to Action Research Group, which pretexted with abandon on HP‘s behalf. ARG billed DeLia for services rendered on April 21, April 22, April 25, April 26, April 27,. April 29, May 2, May 6, May 8, May 9, May 11, May 12, May 13, May 16, May 17, May 18, May 21, June 14, June 15, June 16, June 20 and June 23. It’s not clear that all of this work was for HP, but most of it unquestionably was.

As Kona I unfolded, DeLia returned to Dunn with an occasional request for information but did not look to her for guidance and did not keep her closely informed of what he was doing. On May 9, a few days before the HP board’s monthly meeting, a frustrated Dunn nudged DeLia by email. “Ron, would you be able to give me a brief update in the next day or two?“ DeLia did not respond and so the next day the chairman sent another message: “Please call me on my cell.“ It wasn’t until June 14 that DeLia finally emailed Dunn a draft report summarizing his progress, or lack thereof. Dunn, who took care to keep Baskins in the loop throughout Kona I, immediately forwarded DeLia’s report to the general counsel.

Why wasn’t DeLia more responsive to the chairman? Because he didn’t have to be. In the lingo of HP Security, Dunn was merely a “client” or a “complainant,” and certainly not the boss. The non-executive chairman was an outsider to be respected for the power of her position and placated if possible, but who was not to be allowed inside the investigation. Naturally, DeLia took his instructions from the man who reviewed his invoices and cut him pay checks: Anthony Gentilucci, the security group‘s director of investigations. Gentilucci was one level below James Fairbaugh, the head of HP Global Security, who, in turn, reported to Wayman, who retained his chief financial officer position after Hurd was hired. Wayman, of course, reported to Hurd,

In his written report, DeLia noted that Kona 1 consisted in part of “analyzing intelligence through telephone subscriber records.” He cautioned that these records are “obtained verbally from the various telephone carriers and is subject to human error,” but he did not describe Action Research’s activities and he buried his only mention of pretexting in a footnote referring cryptically to “two pretext calls being placed.”

Ideally, this passing reference would have set off alarms in Dunn’s brain. That it didn’t cannot reasonably be held against her. She did not bear the burden of supervising DeLia and when it came to questions about the legality of Kona 1 she properly deferred to Baskins, who was HP‘s chief legal officer. As it happened, Baskins did ask DeLia to explain the phrase “pretext calls” and jotted down his answer on a notepad:. “Is a time process where carriers such as Nextel/Sprint are contacted and callers use a pretext to extract info, i. e., I did not make the call.” Baskins let it go–a big mistake on her part, as it turned out. But could Dunn have been expected to second guess HP’s general counsel? That was Hurd’s prerogative and responsibility, not Dunn‘s.

As Kona I was petering out inconclusively in June, 2005, Hurd pressed HP Security to devise a more effective approach to investigating leaks. “Guys, I think everyone is aware that Kevin Huska and Jim Fairbaugh have been having discussions with the CEO on putting together a reactionary team for future events of ‘Unauthorized Disclosures,‘” Gentilucci wrote in a memo to a select group of HP Security colleagues in July, 2005. The existence of the Unauthorized Disclosure Team was a closely guarded secret within HP. After all, there was no telling where the company might next spring a leak; every director and senior executive was potentially a suspect and a target of a future UDT investigation. Dunn did not learn of the UDT’s existence until long after she had left the board but was hardly surprised by the discovery. “Mark had an Attila the Hun approach to the whole issue,“ she recalled.

HP’s newly created SWAT team, which was lead by Gentilucci, investigated a series of new leaks that had roiled the company in May and June. Again, phone records were pretexted and several directors were put under surveillance at a special board meeting at a resort in July. The UDT also reviewed the findings of the company’s tree previous leak investigations in 2005, all to no avail.

On July 22, 2005, Hurd and Dunn met with the principals of the Unauthorized Disclosure Team in a conference room at HP headquarters. Fairbaugh and Baskins were present, but Gentilucci took the lead, making a Power Point presentation that outlined the investigative techniques used so far.. HP Security’s chief of investigations provided scant detail about how his colleagues had obtained private phone records and made no mention at all of pretexting. Gentilucci conceded that company investigators had failed to conclusively identify the leaker, though the evidence collected pointed to three suspects: Jay Keyworth, Tom Perkins and Robert Knowling, a Fiorina loyalist who was resigning from the board in a few months anyway.

A particularly egregious leak published by CNET on Jan. 23, 2006, offered the Unauthorized Disclosure Team a golden opportunity to impress Hurd and justify its existence. Under the UDT Protocol that Hurd approved in July, 2005, the investigative team was to be headed by a senior member of the company’s legal staff. Baskins named one of her direct reports, Kevin Hunsaker, team leader. Hunsaker would make all the difference, bringing a drive and coherence to what was dubbed the Kona II investigation that had been missing from all the preceding probes. Kona II was a success, in the sense that it unmasked director Jay Keyworth as CNET’s secret source. However, Hunsaker got overly caught up in the excitement of the case, authorizing investigative methods so ethically dubious that they would unnerve even a couple of grizzled ex-cops on HP Security’s staff.

Bob Sherbin, HP’s communications chief, sounded the alarm about the CNET leak after receiving a phone call from a CNET reporter three days before the story appeared. Sherbin immediately conferred with Hurd. After securing the CEO’s approval, Sherbin alerted HP Security by email. “Mark believes the names worth looking at are Hackborn, Babbio, Salhany, Keyworth and Perkins,” he confided in a message to Fairbaugh and Gentilucci. (These were all names of directors.)

When Baskins telephoned Dunn a few days later to inform her that the company had begun a new investigation under Hunsaker’s direction, the chairman again suggested bringing in Kroll Associates to take charge. “We now have more resources, more expertise,” Baskins countered, referring to the UDT while stopping just short identifying it by name. “Mark has made it a priority that we be able to swing into action and do this right. It would be very demoralizing to go outside.” Again, Dunn let the issue drop, deferring to Hurd as earlier she had deferred to Wayman.

Perhaps because Hunsaker was aware of Dunn’s preference for Kroll, he did his best to impress the chairman with his diligence. Hunsaker was much more responsive to her requests for progress reports than DeLia had been during Kona II, but he took his instructions from his boss, Baskins, who took hers from Hurd. At Baskins’ suggestions, Hunsaker obtained the phone numbers of board members and other HP insiders not from Dunn, as DeLia had done in Kona 1, but from Hurd’s personal assistant. “I think we have Mark’s support,” Gentilucci confided to a member of the Unauthorized Disclosures Team as Kona II was getting underway, “Actually, I know we do.”

The methods that the Unauthorized Disclosure Team used in Kona II included putting board members and reporters under surveillance, inspecting their household trash, and pretexting their private phone records. There is no evidence that either Hurd or Dunn was aware of what the UDT grandiosely termed its “covert operations”–with the exception of the unsuccessful gambit called the “Jacob sting.”

The idea was to trick CNET reporter Dawn Kawamoto into revealing her inside source by sending her emails from a disgruntled HP executive named Jacob, who did not actually exist. Hunsaker wanted to bait the hook with a tidbit of bonafide inside information and enlisted Dunn to obtain Hurd’s approval of the particular tidbit in question. “I spoke with Mark, and he is on board,“ Dunn informed Hunsaker. Hurd also directly approved a second email to Kawamoto from Jacob, this one containing phony inside information. “We will not send the message unless and until you are fine with the content,” Hunsaker declared in a message to Hurd, who gave his assent.

As Kona II neared its end, Dunn asked Hunsaker for a comprehensive report on the investigation. Hunsaker’s 18-page report identifying Keyworth as the leaker was addressed to Hurd, Baskins and Dunn. After meeting with the investigative team in mid-March to review the report, the CEO, chairman and general counsel decided that the findings of Kona II should be presented to the board at its May meeting–not by the chairman, but by Bob Ryan, chairman of the board’s audit committee, which was responsible for overseeing the company‘s standards of business conduct.

As Spygate ran its course in the fall of 2006, HP fired Baskins, Hunsaker and Gentilucci and severed its ties to DeLia. But how was it that Pattie Dunn took the fall when she had not been allowed inside of any of HP’s five leak investigations of 2005-6 and when it was Bobb Wayman who had authorized the two investigation and it was Mark Hurd who had authorized the last three and whose fingerprints were all over the climactic Kona II. Most of The Big Lie’s 355 pages are devoted to exposing what amounted to a complex conspiracy against Dunn, but the short answer is this: because Tom Perkins willed it to happen.

Perkins, a wealthy and temperamental retired venture capitalist, came to despise Dunn, largely because she was an obstacle to his desire to dominate the HP board and to buddy up to Hurd. After resigning from the board in anger at the May meeting over the outing of his friend and ally Keyworth as the leaker, Perkins exposed HP’s leak investigations to public view with the avowed goal of disgracing Dunn and forcing her removal as HP chairman. Perkins, a well-connected Republican, advanced his scheme by pulling political strings in Washington and Sacramento, but the primary instrument of his revenge was an artful campaign of media manipulation. In the end, Dunn was convicted of trumped-up charges in the court of popular opinion before the evidence that would have exonerated her–the emails and other HP documents about the leak investigations–had been made publicly available.

The rush to judgment that warped the coverage of Spygate was understandable, if not quite forgivable, given the time pressures of covering a big breaking news story in the digital age. As it happened, though, the press had had five years before Dunn died to go back and figure out what had really gone on inside HP’s puzzle palace in 2005-6. Instead, too many obituarists reacted to the news of Dunn’s passing by digging out the old stories and lazily repeating their errors: Dunn “authorized a boardroom surveillance probe” (Associated Press); she “authorized a spying operation and put it in the hands of outside investigators, who ran amok” (New York Times); she “hired private investigators, and some of them used a method called pretexting” (All Things Digital); she “spearheaded the secret investigation of members of HP’s board “ (CNN Money), and so on.

No, she didn’t. Not by a long shot.. Pattie Dunn was not a perpetrator of HP’s villainy but rather its principal victim. That her death should result in the besmirching of her reputation a second time was far more scandalous than anything she ever did.

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply