Hewlett-Packard's looming boardroom scandal comes at the eve of the company's large user and partner event, the HP Technology Forum, which begins Sept. 17 in Houston.
Mark Hurd, HP's CEO, is scheduled to speak at the conference. HP is expecting some 7,000 attendees.
HP is facing a potential range of legal actions over an investigation of boardroom press leaks. In a filing earlier last week with the Security Exchange Commission, HP said it hired an outside firm which used pretexting -- a term used to describe people who pretend to be someone else -- to obtain telephone records. In this case, the telephone records of board members and some reporters were obtained.
HP's best move is "complete transparency -- admit that it was a business blunder, but it's essentially an internal business issue and do everything they can to discourage prosecutions from going out," said C. Hunter Wiggins, a partner at Sonnenschein Nath & Rosenthal.
HP will have to show that the board understands and recognizes that this conduct is disastrous and that is has taken steps to clean up its own house, Wiggins said.
Pretexting can bring legal trouble under a number of California laws, including its constitutionally protected right to privacy, as well as a state computer crime law that makes it illegal to unlawfully gain access to a person's computer, Wiggins said.
California's identity theft law may be applied as well because it could be argued that pretexting involves some form of identity theft, Wiggins aid. HP's board and the phone carriers may bring lawsuits as well.
Federal action, including an SEC investigation is possible. The SEC doesn't disclose its investigations, but if a public company is facing a formal SEC investigation it may disclose that fact, said Wiggins, who previously worked for the SEC.
Although federal law requires telephone carriers to protect the privacy of phone records, the states have been moving to clear up any ambiguity over pretexting. In the last two years, more than 11 states have passed laws imposing sanctions on pretexting, said Joseph Sanscrainte, a telecommunications and privacy lawyer with Bryan Cave.
California doesn't have a pretext-specific ban, but the states that do are Arizona, Connecticut, Colorado, Georgia, Maryland, Michigan, Minnesota, Okalahoma, Rhode Island and Washington, Sanscrainte said. He added he expects other states to follow.