HP 2010 Annual Report Download - page 155

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 18: Litigation and Contingencies (Continued)
• Beginning in September 2006, HP has received requests from the Division of Enforcement of
the Securities and Exchange Commission for records and information and interviews with
current and former HP directors and officers relating to the leak investigation, the resignation of
Thomas J. Perkins from HP’s Board of Directors, HP’s May 22, 2006 and September 6, 2006
filings with the SEC on Form 8-K, stock repurchases by HP and securities transactions by its
officers and directors that occurred between May 1 and October 1, 2006, and HP’s policies,
practices and approval of securities transactions. In May 2007, HP consented to the entry of an
order by the SEC ordering HP to cease and desist from committing or causing violations of the
public reporting requirements of the Securities Exchange Act of 1934, as amended. HP has been
advised by the staff of the Division of Enforcement that the staff has completed its investigation
and does not intend to recommend that any other SEC enforcement action be brought in
connection with these matters.
• In September 2006, HP received a request from the U.S. Federal Communications Commission
for records and information relating to the processes employed in the leak investigation. HP has
responded to that request.
In addition, four stockholder derivative lawsuits have been filed in California purportedly on behalf
of HP stockholders seeking to recover damages for alleged breach of fiduciary duty and to require HP
to improve its corporate governance and internal control procedures as a result of the activities of the
leak investigation: Staehr v. Dunn, et al. was filed in Santa Clara County Superior Court on
September 18, 2006; Worsham v. Dunn, et al. was filed in Santa Clara County Superior Court on
September 14, 2006; Tansey v. Dunn, et al. was filed in Santa Clara County Superior Court on
September 20, 2006; and Hall v. Dunn, et al. was filed in Santa Clara County Superior Court on
September 25, 2006. On October 19, 2006, the Santa Clara County Superior Court consolidated the
four California cases under the caption In re Hewlett-Packard Company Derivative Litigation. The
consolidated complaint filed on November 19, 2006, also seeks to recover damages in connection with
sales of HP stock alleged to have been made by certain current and former HP officers and directors
while in possession of material non-public information. Two additional stockholder derivative lawsuits,
Pifko v. Babbio, et al., filed on September 19, 2006, and Gross v. Babbio, et al., filed on November 21,
2006, were filed in Chancery Court, County of New Castle, Delaware; both seek to recover damages for
alleged breaches of fiduciary duty and to obtain an order instructing the defendants to refrain from
further breaches of fiduciary duty and to implement corrective measures that will prevent future
occurrences of the alleged breaches of fiduciary duty. On January 24, 2007, the Delaware court
consolidated the two cases under the caption In re Hewlett-Packard Company Derivative Litigation and
subsequently stayed the proceedings, as the parties had reached a tentative settlement. The HP Board of
Directors appointed a Special Litigation Committee consisting of independent Board members authorized
to investigate, review and evaluate the facts and circumstances asserted in these derivative matters and to
determine how HP should proceed in these matters. On December 14, 2007, HP and the plaintiffs in the
California and Delaware derivative actions entered into an agreement to settle those lawsuits. Under the
terms of the settlement, HP agreed to continue certain corporate governance changes until December 31,
2012 and to pay the plaintiffs’ attorneys’ fees. The California court granted final approval to the
settlement on March 11, 2008 and subsequently granted plaintiffs’ counsel’s fee application and dismissed
the action. On June 12, 2008, the Delaware court granted final approval to the settlement and the
plaintiffs’ application for attorneys’ fees and also dismissed the action. Because neither the dismissal of
the California nor the Delaware derivative action was thereafter appealed, both cases are now concluded.
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