HP settles spy scandal for $14.5m

The California Attorney General's Office said on Thursday Hewlett-Packard will pay $14.5m to settle civil charges related to the company's now infamous spy scandal.

The Attorney General's office said that as part of the settlement, HP will "finance a new law enforcement fund to fight violations of privacy and intellectual property rights" and adopt corporate governance reforms.

Attorney General Bill Lockyer stated: "The Hewlett-Packard incident has helped shine a national spotlight on a major privacy protection problem. With its governance reforms, this settlement should help guide companies across the country as they seek to protect confidential business information without violating corporate ethics or privacy rights."

Lockyer said that the new fund will help ensure that when businesses cross the legal line they will be held accountable. He also applauded the company.

"Fortunately, Hewlett-Packard is not Enron," he said. "I commend the firm for cooperating instead of stonewalling, for taking instead of shirking responsibility, and for working with my office to expeditiously craft a creative resolution."

The case is separate from the felony criminal charges that have been brought against five individuals.

Mark Hurd, HP chairman and chief executive officer, said: "We are pleased to settle this matter with the Attorney General and are committed to ensuring that HP regains its standing as a global leader in corporate ethics and responsibility." Lockyer's office said that the Santa Clara County Superior Court has approved the settlement.

Among the other stipulations, HP agreed that for five years it will:

• Maintain a chief ethics and compliance officer. HP named Jon Hoak to that position in October.
• Expand the role of the company's chief privacy officer to review HP's investigation practices
• Expand the company's employee and vendor codes to ensure that they address ethical standards regarding investigations
• Retain an expert in the field of investigations to assist the company's chief ethics officer with regard to investigations.

Of the settlement money, $13.5m will go into the new fund, while $650,000 will go to statutory damages, and $350,000 will reimburse the Attorney General's office for the costs of its investigation.

A lawyer for two reporters whose phone records were accessed said HP has yet to provide a full accounting of what transpired.

"My clients are all gratified that the AG's office has gotten HP to take even further responsibility and to pay a small sum of money to the general public to make up for its improper acts," said Terry Gross, whose firm, Gross & Belsky, represents The New York Times and its reporter John Markoff, as well as Business Week reporter Ben Elgin. "But my clients still are looking for HP to provide us fuller information as to the extent of their invasions of privacy."

Ina Fried writes for CNET News.com.