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Airing a Board's Dirty Laundry

By Ralph Ferrera and Paul Howard
March 28, 2008

The fallout from Hewlett-Packard's ('HP') controversial boardroom leak investigation has led to a variety of actions ' including an investigation by the California Attorney General's office and Congressional hearings on the practice of 'pretexting' ' a tactic employed by Hewlett-Packard to gain the confidential phone records of board members. Despite the considerable press attention devoted to the incident, it is an otherwise under-the-radar action by the SEC that could have the greatest long-term impact on corporate governance and compliance.

On May 23, 2007, the SEC issued a cease-and-desist order (the 'SEC Order') stemming from HP's failure to report the reason for Thomas Perkins' resignation from the board in Item 5.02(a) of its Form 8-K filing (Form 8-K is used by public companies to report significant events to their shareholders as they happen, rather than doing so only on a quarterly basis in Form 10-Q). In the current case, Perkins' resignation was an event that triggered the obligation for HP to file an 8-K, and it did so in a timely manner. The SEC's action, however, focuses on what was not included in the filing.

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