Why HP’s board really fired Mark Hurd — a leaked deal, says WSJ

Both the Wall Street Journal and Fortune have published extensive investigative stories about the firing of Mark Hurd and his relationship with former HP contractor and soft porn actress Jodie Fisher. The Journal alleged that Hurd leaked to her the undisclosed news that HP would buy EDS.

The allegation was contained in the letter that Fisher’s attorney, Los Angeles celebrity attorney Gloria Allred, wrote to Mark Hurd during July of this year. The allegation is not independently substantiated, but the fact that it was contained in the initial letter to HP shows why the HP board, which has been mocked for its behavior, acted so quickly to investigate the matter. That letter set off a chain reaction of events that led to HP’s firing of Hurd on Aug. 6. (HP, incidentally, maintains that Hurd resigned and was not fired; but he was forced to resign).

[aditude-amp id="flyingcarpet" targeting='{"env":"staging","page_type":"article","post_id":225457,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,","session":"D"}']

Hurd’s firing was so shocking — since he had helped turn HP into the world’s largest tech company — HP’s stock value lost $9 billion by the end of Aug. 9. The story took a not-so-lurid turn when Fisher (pictured right) came forward to say that — despite the fact that she filed a sex harassment lawsuit against Hurd — she never had sex with Hurd and was sorry he lost his job over the matter. Hurd admitted to failing to live up to HP’s code of conduct. Then HP’s PR nightmare grew as nude Playboy photos of Fisher and her soft porn career turned up.

Throughout the whole media maelstrom that followed, the EDS matter never came up; allegedly, the Allred letter said that Hurd told Fisher about the deal in March, 2008. The $13.9 billion deal was disclosed to the public until May, 2008. That allegation was likely something that the board knew would draw the attention of regulators at the Securities and Exchange Commission, since it represents a breach of fiduciary duty and likely violates insider trading laws. The story does not say if the board substantiated that the leak happened.

The salacious story consumed Silicon Valley until Hurd (pictured right) got hired at Oracle on Sept. 6 and HP’s board replaced him with former SAP chief executive Leo Apotheker. Then the story died out. Just when everyone thought it had died down, this pair of stories will surely get tongues wagging again.

Both stories say they have reconstructed the events that led to Hurd’s firing as closely as they can, but they don’t have on-the-record interviews with the two people who have a lot of the answers: Hurd and Fisher. While Fortune alludes to the fact that the attorney letter revealed Hurd had disclosed a “professional secret” to Fisher — which is probably why HP’s attorneys had to take the allegation as seriously as they did — the Wall Street Journal discloses more details of the letter and spills the facts about the EDS leak.

Fortune chose to print considerable detail about Fisher, including her divorce details, a judgment against her for failing to pay rent, and just about everything except the address of the staffing agency where she worked for her mother in New Jersey. The detail is interesting, but it’s not particularly enlightening. Hurd admitted being alone with Fisher in each other’s hotel rooms. But there was no evidence to support Fisher’s claim that Hurd violated HP’s harassment policy. As has been reported, the board eventually became alarmed that Hurd wasn’t telling the full truth about the matter. He was fired because the board lost confidence that he was being honest with them.

For instance, Hurd allegedly told directors that he didn’t know Fisher had acted in adult movies. But HP investigators found that he had used his computer to visit web pages showing her in pornographic scenes, including a site called “erotic4u.com.” Hurd had also said he didn’t know Fisher well, but the letter had eight pages of details of meetings between the two in hotels around the world. And subsequent investigations showed that he had dined with her and, in expense reports filed by someone else, did not disclose that. In fact, the two had met on a couple of occasions when HP did not have any relevant marketing event hosted by Fisher.

Hurd was introduced to Fisher in 2007 by the CEO’s unofficial chief of staff, who was named Caprice McIlvaine by the WSJ and Caprice Fimbres by Fortune. (Evidently her name is Caprice Fimbres McIlvaine). McIlvaine, who resigned a few days after Hurd, told investigators she had spotted Fisher on the reality TV show Age of Love and thought she would be appropriate to help prioritize the HP customers at various HP marketing events. The events ended in late 2009.

When the letter arrived and HP began investigating, the board was inclined to believe Hurd. But as the probe proceeded, the support eroded. While Hurd wanted to keep the matter quiet, HP’s board recalled the spying scandal that cost then-chairman Pattie Dunn her job. Hurd knew that HP’s investigators spied on journalists, but he emerged unscathed in the 2006 scandal. Concerned that regulators would criticize the board for not disclosing an important matter — including the EDS allegation — the board took the investigation seriously.

[aditude-amp id="medium1" targeting='{"env":"staging","page_type":"article","post_id":225457,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,","session":"D"}']

Fortune said that two HP directors, former Medtronic CFO Robert Ryan and Lucille Salnany, were convinced that Hurd had to be fired. They had been in daily contact with HP’s investigators on the matter. Two other directors, former IBM chief financial officer John Joyce and legal services firm founder Joel Hyatt, believed that Hurd should stay. The others, including Netscape founder Marc Andreessen, former Rohm & Haas CEO Rajiv Gupta, former Wachovia CEO G. Kennedy Thompson, and McKesson CEO John Hammergren, began the fateful board session undecided. After the investigation was over, all 10 directors had swung against Hurd, Fortune said.

At one point, Andreessen visited Hurd at home and told him, regarding the hiring of a porn actress, that, “You have created a situation ideally suited for TMZ,” a reference to the tabloid TV show and web site, the Journal reported. Hurd tried to hang on to his job and settled the lawsuit with Fisher on the eve of his firing. Fisher said in the settlement that her earlier letter had “many inaccuracies” without saying what they were. She added, “I do not believe that any of your behavior was detrimental to HP or in any way injured the company or its reputation.”  When Hurd’s attorneys told the board of the settlement with Fisher, some directors felt Hurd had cut the investigation off. Then, on the morning of Aug. 6, Hurd resigned. The announcement came out after the stock market closed that day. The Journal said the question of what Hurd had disclosed about the EDS deal remains unresolved.

Left unsaid is why these full investigative pieces are appearing now. Perhaps the lawsuit over piracy between SAP and Oracle has turned dirty and sources on both sides are helping the journalists in question.