HP Investors Meet, Spy Case Against Dunn Is Dismissed

A judge dropped all charges against former Hewlett-Packard Chairwoman Patricia Dunn, who was accused of fraud in the boardroom spying scheme that rocked one of Silicon Valley's most respected companies.

Three other defendants in the case also will avoid jail time after their lawyers entered no contest pleas Wednesday to misdemeanor charges of fraudulent wire communications in Santa Clara Superior Court.

Judge Ray E. Cunningham did not immediately accept the pleas by former HP ethics chief Kevin Hunsaker, and private investigators Ronald DeLia and Matthew DePante, and said the charges against them will also be dropped in September after they complete 96 hours of community service and make restitution.

State prosecutors announced earlier Wednesday that Dunn and the three other defendants had agreed to plead guilty to reduced charges and that Dunn would be spared community service because of her health. She revealed last year that she was being treated for advanced ovarian cancer.

But the office of Attorney General Jerry Brown later said that release was incorrect. Lawyers for Dunn and the other defendants said deal with the state called for Dunn's case to be dismissed.

"This is a vindication of Patty Dunn in every sense of the word," said her lawyer, James Brosnahan. "It shows what she's maintained throughout: that she's innocent of these charges."

The four were initially charged in October with four felony counts: use of false or fraudulent pretenses to obtain confidential information from a public utility; unauthorized access to computer data; identity theft; and conspiracy to commit each of those crimes. Each of those charges carried a fine of up to $10,000 and three years in prison.

HP Investors Vote Down Nomination Proposal

Separately, HP investors voted down a proposal floated in the wake of this spying scandal that would have allowed large shareholders to nominate their own candidates for the board of directors.

HP said Wednesday at its annual shareholder meeting in Santa Clara that the proposal failed to garner the required 1.8 billion shares voted needed to amend the company's bylaws concerning director nominations.

About 1.61 billion shares, or 52% of the total shares voted, were against the proposal. More than 800 million shares, or 39% of the total shares voted, were in favor.

The measure would have given stockholders who have owned at least 3% of HP's outstanding stock continuously for at least two years the ability to nominate up to two candidates.

Scott Adams, an organizer with the American Federation of State, County and Municipal Employees, which supported the measure, said his organization was not disappointed by the result. The large number of shareholders who did vote in favor of it "signals that investors want board reform," he said.

Palo Alto-based HP opposed the measure on grounds it would create costly and divisive proxy fights over director elections and would lead to the election of "special interest directors."

Some large stockholders had also come out against the proposal, saying the change would give investors with a small percentage of the outstanding shares the ability to wage expensive proxy contests at the company's and shareholders' expense.

"HP is pleased that this proposal was not approved by the super majority vote required ... The board believes that this proposal was not in the best interests of HP stockholders," HP said in a statement.

Advocates for the director-nomination change included the nation's largest public pension fund, the California Public Employees' Retirement System, or CalPERS, which argued it would be an effective tool for ensuring director accountability.