HP's Penance Pondered

10:30 AM -- Hewlett-Packard Co. (NYSE: HPQ) has settled up with the State of California, putting to rest months of turmoil over the questionable ethics used by its board to investigate fellow members. (See Paranoia in Palo Alto and Drip, Drip, Drip.)

Without admitting any wrongdoing, HP has agreed to pay the state $13.5 million to create a Privacy and Piracy Fund for the California attorney general's office, which will be tapped to help prosecute violations of the public's "privacy and intellectual property rights." The mandate is a response to HP's alleged use of espionage tactics like "pretexting" to get access to journalists' and board members' private records.

HP also must pay $650,000 in civil penalties and $350,000 for the attorney general's investigative costs. And the firm has to take a number of corrective steps to boost its business ethics, including the appointment of a board-level watchdog.

The ruling won't affect criminal charges brought against individuals, including former board chair Patricia Dunn.

So, HP as a company moves on. The scandal hasn't affected buyers of its storage wares. Investors have proven indifferent to it. Nonetheless, the taint of wrongdoing will likely resonate in the thoughts of many industry observers.Who can help but wonder how one of America's most respected technology companies got itself into this mess? Who can ignore how seasoned professionals opened themselves to incredible risk in order to satisfy paranoia worthy of the old KGB? What day-to-day activities, oversights, and misspent planning contributed to making this alleged breach acceptable, even when common sense suggested horrible consequences?

HP's disgrace is a reminder that power and success are no guard against self-delusion. If HP execs, given their position in the world's technology market, could stray so far from the high road, surely no one is immune.

This case should remind anyone in business that it's always possible to be blind-sided by misguided intentions, even if one's motives are sound.

Mary Jander, Site Editor, Byte and Switch