By Roger Parloff
March 15, 2007

Thanks be to a state superior court judge, former California Attorney General Bill Lockyer’s ghoulish felony prosecution of former Hewlett Packard (HPQ) Chairman Patricia Dunn and three others for their involvement in HP’s telephone pretexting scandal ended yesterday — not with a bang, but a whimper.

Judge Ray Cunningham dismissed all charges against Dunn outright, and will dismiss all charges against her three co-defendants in about six months, after they do some community service. Though each had been charged with four state-law felonies, none will ultimately stand convicted of anything. The three whose charges were not dismissed outright — a senior HP lawyer and two outside investigators — were required only to plead “no contest” to a single misdemeanor, though the misdemeanor will ultimately be dismissed too. (A “no contest” plea is an admission of nothing that nevertheless permits the state to treat you as if you were guilty.) To be clear, none of the four will be left with any criminal conviction stemming from this prosecution. On the other hand, each still faces potential exposure in an on-going federal criminal inquiry arising from the same events.

These were the charges that arose from HP’s outlandishly overblown, but legally murky attempt to ascertain which director on its board had been leaking inside corporate information to the press, in violation of HP policy and, possibly, the director’s fiduciary duties to the corporation. In the course of the inquiry, HP’s outside investigators obtained private phone records of directors and journalists by pretending to be the people in question.

There had never been any doubt that Dunn had acted in good faith throughout the inquiry, having received advice from two senior HP attorneys — then HP general counsel Ann Baskins, who was never criminally charged, and senior counsel Kevin Hunsaker, who was — that the investigatory techniques were lawful. Nevertheless, Lockyer, who was then running for state treasurer, evidently theorized that ignorance of the law was no defense, which is, indeed, the rule for some white-collar offenses. Still, the prosecution would have been wildly inappropriate on these facts even had Dunn not been suffering from late-stage ovarian cancer, as she was.

California had no law specifically aimed at telephone “pretexting,” as the practice has come to be called, until September 29, 2006, long after the events at issue had occurred. When that law finally was enacted, it was a misdemeanor. Nevertheless,Lockyer charged each defendant with four felonies under preexisting laws that he theorized could be applied to this situation, though none ever previously had been. (For an earlier post questioning the appropriateness of these charges, see here.) In light of yesterday’s consensual resolution, we’ll never know if any of his theories would have panned out.

The recently enacted California misdemeanor that does prohibit “pretexting” was signed into law, of course, just two days after Dunn herself testified before a Congressional subcommittee exploring HP’s runaway leak probe. Bravely, Dunn had chosen to testify rather than invoke her Fifth Amendment right against self-incrimination, the way Hunsaker, Baskins, and all the others in Lockyer’s gun sights had.(Dunn’s attorneys at Morrison & Foerster were roundly second-guessed in the press for “letting” her do so — mainly by attorneys who were seeking free advertising for their own criminal practices — but the decision was, of course, ultimately Dunn’s.)

Federal law on pretexting during the period in question was also murky, so the defendants await with trepidation the outcome of the ongoing federal inquiry, which appears very much alive. In a recent New Yorker article, journalist James Stewart said that pretexting could “obviously” constitute federal wire or mail fraud. When a journalist of Stewart’s caliber says something like that, it may well mean that he has spoken on background to the federal prosecutors, and that they are, indeed, proceeding on that theory. Still, I disagree with Stewart and/or his sources; a mail or wire fraud on these facts would be unique, pioneering, abusive, and highly suspect as a matter of law. Under federal precedents, deceit alone does not constitute “fraud,” which usually requires that the defendant intend to realize some personal pecuniary gain by depriving someone of money or property. (Though there are exceptions — see this article on “honest services” fraud for a general discussion — none seem to apply here.) In this case the victims were being deprived only of their privacy rights, and the intent of the defendants (though ill-considered and betraying terrible judgment) was not to enrich themselves but to catch an alleged wrongdoer. Even if the conduct should be made illegal, people should not be prosecuted retroactively for conduct that wasn’t clearly designated as criminal at the time they engaged in it.

COMMENT FROM STATE TREASURER BILL LOCKYER (received March 19, 2007):

The Hewlett-Packard pretexting case certainly has culprits. Neither I nor lawyers at the Department of Justice are among them. The defendants in this case broke the laws of our state and, in the process, violated constitutionally-protected privacy rights. Combined, the prosecutors in this case possessed more than seven decades of experience. They evaluated the evidence and determined they could win a unanimous jury verdict on the charges filed.

HP officials’ legal investigation of the conduct essentially consisted of consulting a lawyer in Massachusetts connected to a defendant and surfing the Web. That lack of due diligence is matched only by some pundits’ lack of credibility. The Stanford professor frequently quoted as a critic of the charges didn?t even know phone companies are utilities in California, a key facet of the case.

This case was not cobbled together. It rested on a solid foundation of evidence and state laws. I had a duty to pursue justice, regardless of the status or special circumstances of any particular defendant. If I had wanted to take the politically correct action, I would have ignored the evidence and dropped the case. I’m proud I didn’t place election-year comfort above duty.

Bill Lockyer
California State Treasurer

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