UPDATED 09:54 EDT / NOVEMBER 06 2010

The Mark Hurd, HP, & Jodie Fisher Drama Continues. He Lied To Board & Was Caught.

image More drama is coming in on the Mark Hurd HP situation.  Fortune and Wall Street Journal have good in depth pieces which validate my reports in August [see editor’s note at bottom. -mrh].

As I had reported in August the real reason that Mark Hurd was ousted was because of his sexual relationship with Jodie Fisher and his mistrust by the board.  In that post I wrote:

The “Real” Real Reason’s Hurd Was Ousted

Here are some reasons emerging from my sources in Silicon Valley.

1) Hurd was hiding the relationship with Fisher and executed a settlement behind the boards back to avoid them finding out.

2) Hurd wanted to stay and thought he could “play” the HP board and they wouldn’t have the guts to challenge him.

3) Hurd figured that he had the power over the company because in his mind “he’d owned Wall Street”. Hurd called the HP Boards bluff.

4) He had zero support from the rank and file and top execs.

5) His bad judgment was visible to the entire company and out of control.

6) There are rumors that Hurd had other “encounters” with at least two other woman other than Fisher.

According to the Wall Street Journal story directors where done with Hurd.  One director Lucille Salhany of HP was quoted as  “He lied to my face and he’s lying to you,” Ms. Salhany told the other directors, according to people familiar with the meeting. “There’s no grounds for trusting him.”

In other words the board had the good on Hurd.  According to my (many) sources close to HP it is well known about what Hurd was doing and with the report from the investigation it was now crystal clear- as I reported in August.

Fortune followed up with a story which goes in depth with more of an angle on Fisher.

Here is the big paragraph from Fortune that highlights the real reason Hurd was ousted although the entire Fortune story is a good juicy read.

A loyal board turns against Hurd

image On Wednesday, July 28, lawyers from Covington presented their preliminary findings to HP’s board in a session that went into the wee hours of the night and resumed by telephone the next day. Hurd, the board’s chairman, wasn’t present when the board went into executive session, where his fate was discussed.

Up to that point (contrary to some press accounts), HP’s board had been overwhelmingly supportive of Hurd. It even had begun discussing Hurd’s new vision for long-term strategy, now that HP’s cost-cutting phase was over. That said, the Fisher allegations had shaken the board’s support. At the beginning of the late-July conversation, two directors favored retaining Hurd: John Joyce, a former chief financial officer of IBM (IBM), and Joel Hyatt, who founded a legal services company and subsequently was involved in Democratic politics.

Two directors, former Medtronic (MDT) CFO Robert Ryan, also the board’s lead independent director, and Lucille Salhany, a media executive and chair of the board’s nominating and governance committee, were convinced that Hurd should go. This was no coincidence: Their roles put them in daily contact with the Covington investigators and they knew much more than their fellow directors about what the investigators were turning up. The other directors, including Andreessen and current and former CEOs Rajiv Gupta (ex-CEO of Rohm & Haas), G. Kennedy Thompson (ex-CEO of Wachovia) and McKesson (MCK) CEO John Hammergren, began the day undecided.

What the board members learned—and what they discussed among themselves—eventually swung all 10 against Hurd. The Covington lawyers, who also culled Hurd’s emails and computer usage, had concluded that though there was evidence of a close relationship—Hurd had admitted being alone with Fisher in each other’s hotel rooms—there was no evidence to support a case that Hurd violated HP’s harassment policy. But they had uncovered some worrisome inconsistencies in Hurd’s expense reports—primarily regarding dinners that Hurd had with Fisher. Hurd, who didn’t prepare his own reports, offered to repay the money, said to be between $2,000 and $20,000. But the CEO was adamant that there needed to be no disclosure of Fisher’s allegations.

The board was warned of the potential cost of silence. Kent Jarrell, a former broadcast journalist who runs the litigation communication practice for PR firm Apco, told the directors that if word leaked that Hurd had been accused of harassment by a client of Gloria Allred, a PR nightmare inevitably would ensue.

The board members assumed that Allred sooner or later would divulge the harassment allegations and that Hurd’s private life would become fodder for gossip websites. Worse, from their perspective, they might again be accused of hiding important facts or misleading shareholders, as they had been during the pretexting brouhaha. The expense-account violations, though small in size, also represented a violation of the company’s standards of business conduct, which would require some kind of disciplinary measure—especially given that Hurd publicly trumpeted HP’s adherence to high ethical standards.

The directors quickly decided that some form of disclosure was necessary. Hurd disagreed, and that disagreement began unraveling his relationship with the board. Some directors became convinced Hurd wasn’t being truthful with them about the nature of his relationship with Fisher or his culpability in the expense-account inaccuracies. Whether or not the two had been physically intimate—representatives of both Hurd and Fisher have publicly asserted that the two did not have a sexual relationship—several directors felt that Hurd’s story had changed from their initial informal inquiries to his answers to the investigators. Hurd’s initial denials of an inappropriate relationship with Fisher had been so vehement that, when it turned out there was evidence of a close relationship—including the fact that Hurd and Fisher dined together out of town on two occasions when Fisher was not working at an HP event—some members of the board simply lost their trust in Hurd.

The significance of that perceptual chasm can’t be overstated. Like a divorced couple disagreeing on key facts, Hurd and his once-supportive board simply don’t see eye to eye on what caused the rupture. It helps explain why HP publicly announced that the company found “no violation of HP’s sexual harassment policy” even as some of its directors harbored doubts on everything from the circumstances of how Hurd first met Fisher to what the true nature of their relationship was. In the end, the board had lost so much faith in Hurd that both sides agreed he had to go.

[Editor’s Note: John says: “Wall Street Journal is quoting “sources close to HP”.  I mention this because some folks on Twitter accused me of spreading rumors when I quoted “sources close to HP.” Photo credits to Mehra Media and SiliconANGLE / Ricky McGill. –mrh]

Update:

Fortune has a nice update called Sex, Lies, and HP written by Adam Lashinsky.  Adam is a San Francisco-based editor-at-large for FORTUNE, covering Wall Street and Silicon Valley. Lashinsky joined FORTUNE in 2001, after two years as a contributing columnist. Prior to joining FORTUNE, Lashinsky covered Silicon Valley for TheStreet.com and The San Jose Mercury News. A Chicago native, Lashinsky holds a B.A. in history and political science from the University of Illinois at Urbana-Champaign.


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