HP Chairman Dunn Out in January

HP's chairman will step down following the company's January 2007 board meeting as a result of the press leak investigation she launched and the techniques used, which both the state of California and the U.S. Government are investigating as possible breaches of law.

Patricia Dunn has agreed to step down after the board apparently decided to ask her to do so. Dunn on Friday rebuffed shareholder calls for her to resign, but had indicated she would leave HP at the request of the board. After two days of meetings, it is apparent that was what the board decided was in the company's best interest.

HP CEO and president Mark Hurd will assume Dunn's duties, as well as retain his prior positions. Dunn would stay in the company, although as a director. In addition, the company appointed Richard Hackborn lead independent director.

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In a statement, as she had in the past, Dunn continued to stress the importance of the investigation to uncover who was leaking confidential information. On the other hand, she did express dismay on how the situation was handled.

"Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques," she said. "These went beyond what we understood them to be, and I apologize that they were employed."

It's unclear how the legal issues will progress, however the company could be setting itself up for a long battle. Those reporters that were targeted could sue HP over a breach of privacy, while both the Justice Department and the California Attorney General could also launch their own court cases against the Palo Alto, Calif. company.

Add to this an inquiry now underway by the House Energy and Commerce Committee, and it could mean this issue could nag the company for months -- if not years -- to come. However, analysts have said a possible silver lining could be stricter legislation which would make "pretexting" harder to accomplish, as well as illegal.

In a statement, Hurd said he would ensure that such actions would never happen again in the company. "They have no place in HP," he said. "HP holds itself to the highest standards of business conduct and we are accountable to these standards for everything that we do."

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