(August 16, 2010) — One of the largest retirement systems in Massachusetts has sued Hewlett-Packard Co.’s directors, claiming the group violated their fiduciary duties in connection to the departure of Chief Executive Mark Hurd that caused the company’s shares to drop significantly.
“We have close to $700,000 invested in HP,” Harold Hanna, executive director of the Brockton Retirement System, confirmed with ai5000 Monday morning. He said the Connecticut-based law firm Scott + Scott LLP, representing the pension fund, has been monitoring the case and urged action. “There was fraudulent handling of expense reports by the CEO, claims that he sexually harassed an employee, and further damning is a severance package of $40 million as he leaves,” Hanna said. “We have too much at stake.”
The former CEO surprised the board by settling a sexual-harassment claim before directors were fully aware of the incident, an act they considered a final breach of trust that added to the board’s already strained relationship with Hurd, the Wall Street Journal reported. The board’s subsequent decision to fire Hurd has been met with mounting criticism for firing the chief executive based on a pretext as opposed to ousting him because of his disproportionate focus on short-term gains and lack of vision, New York Times columnist Joe Nocera remarked.
“HP lost significant credibility,” claims the Brockton Contributory Retirement System in a lawsuit filed last week in the Superior Court of Santa Clara County, California, Reuters reported. The complaint includes an order that the individual defendants pay HP damages, the imposition of a constructive trust on Hurd’s severance and profits from alleged improper trading activities, punitive damages, and other remedies.
On August 6, following an investigation that examined a sexual harassment claim, defined by HP as a conflict of interest, that discovered Hurd had falsified expense reports to conceal a relationship with a female marketing consultant, a former actress named Jodie Fisher who worked for HP as an event organizer, the CEO announced his resignation from Hewlett-Packard. According to the lawsuit, HP shares slumped following Hurd’s departure, erasing $9 billion in market value. The suit also alleges that directors of the Palo Alto, California-based company failed to “police insider trading” by not fully disclosing the internal probe into Hurd’s activities, while additionally claiming the directors tried to grant Hurd tens of millions of dollars he did not deserve.
The defendants in the lawsuit include the company’s chief financial officer, Cathie Lesjak, who, following Hurd’s departure, has become the company’s interim CEO. In the pension plan complaint, both Hurd and Lesjak are accused of engaging in insider trading while at HP.
The case is Brockton Contributory Retirement System v. Andreessen et al, Superior Court of California, Santa Clara County.
To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742