- Summary: The California Attorney General's office announced it has been conducting an investigation into how Hewlett-Packard Co. (NYSE:HPQ) traced phone records of its board members last year, though they are unsure whether illegal activity of any sort took place. The activity was, at the very least, "colossally stupid," said Attorney General Bill Lockyer. The tactics used by H-P have already prompted an inquiry from the SEC as well as requests from state investigators for records from H-P and involved telecommunications carriers. The scandal centers on the use of "pretexting" to obtain directors' private phone records in an effort to identify the source of the leaks. Pretexting, or posing as a person in order to obtain private phone or other information about them, is illegal in California. H-P has already admitted to using pretexting in the course of investing leaks of what it felt was sensitive company information. H-P spokesman Mike Moeller said that H-P didn't know pretexting would be involved in the investigation. "We have determined pretexting will not be used in any future investigation if we have to do another one of these," Mr. Moeller added.
- Comment on related stocks/ETFs: After a solid August in which H-P could do no wrong, Mr. Market may finally be dishing out a solid helping of backlash to the company. The share price, which had increased steadily from mid-July ($30) to just before the scandal went public ($36+) finally took a tumble yesterday, losing $0.62, or 1.7%, then falling another $0.15 after hours. George Gutowski has harsh words for HPQ's management and its handling of internal leaks. See yesterday's WSJ piece on H-P, which provides a nice background on the current scandal.
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