What not to look for in law firm

Ok, I know you're getting sick of me talking about Hewlett-Packard. But I can't help it--it's just so funny! Each new tidbit that comes out is even more amusing than the next.

I was reading over a blog by Alex Simpson, who is actually a real lawyer (as opposed to someone who just plays one on TV). Simpson has some additional facts about the fateful boardroom meeting at HP where Patricia Dunn confronts George Keyworth with his phone records (surreptitiously obtained through the pretexting of a investigative firm hired by HP). The news reports I cited here and here gave the impression that H-P boardmember Thomas J. Perkins was also part of the leak and was asked to resign. But, had I actually read over the HP's SEC filing closely, rather than rely on the reporters' take (knowing full well that reporters are lazy and stupid), I would have read the part that says:

At a Board meeting on May 18, 2006, after Dr. Keyworth acknowledged that he had leaked confidential information, the Board, after deliberation, asked Dr. Keyworth to resign his position as a director, which he declined to do. It is at that meeting that Mr. Perkins resigned from the Board after expressing personal frustration with the Chairman of the Board relating to the handling of the matter with the Board. He stated that he objected to the matter being brought before the full Board and that he believed the Chairman had agreed that he and she would handle the matter privately. The Chairman disputed Mr. Perkins’ assertion, explaining that she was complying with advice from outside counsel on the appropriate handling of the matter. At the time, Mr. Perkins confirmed he did not have any disagreement with HP on any matter relating to HP’s operations, policies or practices.

But Alex Simpson also got the scoop that:

Venture capitalist Tom Perkins, of the major Silicon Valley firm Kleiner Perkins Caufield & Byers, a long-time friend of Mr. Keyworth and the chairman of the board's Nominating and Governance Committee, slammed his briefcase down, said "I quit and I'm leaving," and stormed out of the board room.

So, looks like Perkins has some cajones after all.

SEC rules state that a public company must report on Form 8-K item 5.02:

(a)(1) If a director has resigned or refuses to stand for re-election to the board of directors...because of a disagreement with the registrant, known to an executive officer of the registrant...on any matter relating to the registrant’s operations, policies or practices, or if a director has been removed for cause from the board of directors, [you must] disclose the following information:

(i) the date of such resignation, refusal to stand for re-election or removal;

(ii) any positions held by the director on any committee of the board of directors at the time of the director’s resignation, refusal to stand for re-election or removal; and

(iii) a brief description of the circumstances representing the disagreement that the registrant believes caused, in whole or in part, the director’s resignation, refusal to stand for re-election or removal.

This brings me to HP's lawyer, Wilson Sonsini Goodrich & Rosati. A good defense attorney keeps you out of jail, but a good corporate attorney keeps you out of trouble. My question is, even if Larry Sonsini of Wilson Sonsini chased Perkins after his outburst, shouting, "Are you resigning because of any disagreement with HP on any matter relating to HP’s operations, policies or practices," and even if he says, "No, get the hell out of my face," would you recommend to the board that they not file a disclosure about this? What if getting it wrong puts your client in violation of the law? And what if Perkins calls you back in a day or two and says, "Hell, yeah, I disagree with your damn procedures!" What would you, as a lawyer, advise your client?

Further, what would you advise your client to do if it soon became apparent that the private investigations firm your client hired was probably obtaining information illegally? Would you report to the board that the PI firm, to the best of your knowledge, was acting legally because the PI firm assured you it was?

Also, if you learned that the PI firm was engaging in pretexting, would you tell your client that "the use of pretexting at the time of the investigation was not generally unlawful (except with respect to financial institutions)," just because no single federal statute prohibits the practice (except with respect to financial institutions). Would you say this knowing full well that a prosecutor with even half a brain could string together a dozen other statutes and regulations to bring charges against your client? (Oh, and by the way, pretexting is illegal in California, even if it is not with respect to financial institutions.)

Would you let it rest at that, given that if any of this ever comes out, your client will have, at a minimum, a huge public relations disaster? And would you do this if half of your other clients are already caught up in the options back-dating scandal?

Perhaps Perkins' attorney Viet Dinh of Patriot Act fame said it best in the San Jose Mercury News:

"The facts are not totally in. But one thing that is clear is pretexting to get personal records is illegal under federal law and California law. Any lawyer who thinks that lying to get private telephone records is legal needs to evaluate his bar license.''

No kidding. Jeez, even I could do a better job than that.