In the annals of boardroom dramas, the case of Hewlett-Packard Co. and how it allegedly spied on journalists and its own board of directors stands out as a tale of mistrust and manipulation, of deception and misdirection. Beneath the headlines, it also was a melodrama of personal feuds and tricks.
I was spending a sunny Sunday afternoon in September 2006 with my extended family at our beach house in Malibu when my phone rang. Answering, I heard a soft, tentative voice: “May I speak with Michael Sitrick, please?”
“This is he.”
“This is Patricia Dunn, I don’t know if you know who I am.”
“I’d have to live on Mars not to know who you are, Pattie. Nice to meet you. How can I help you?”
Patricia Dunn was the nonexecutive chairman of the board of directors of Hewlett-Packard Co., the largest computer maker in the world, which was, at the moment, caught in a horrendous media hailstorm. She told me she had some concerns about how well H-P’s PR people were handling the crisis and was contacting me at the suggestion of three different people, wondering whether my firm and I might be available to help H-P.
H-P had a disturbing problem with leaks emanating directly from the board of directors, which had understandably upset Mark Hurd, then the CEO, and the board. Hurd had asked every board member if he or she had been leaking information, and each had denied doing so. Thus, everyone knew someone among them was lying. These leaks spawned mistrust, unnerved management, and, some have said, may even have violated federal securities regulations. An investigation of the leaks had gone wildly awry, and those missteps had now become the big story.
Here’s the short version of what happened. Hurd’s predecessor, Carly Fiorina, had asked for an internal investigation of who was leaking confidential information, but it went nowhere. After Fiorina’s firing and the elevation of Pattie Dunn to nonexecutive chairman, board members asked Dunn to oversee a new investigation into the leaks. She was directed to work through the company’s internal security department, and she did. The head of internal security retained an outside investigator to undertake the operation. Unbeknownst to Dunn, this outside firm used questionable methods to review directors’ phone records and conduct surveillance of a reporter and a board member. Agents engaged in “pretexting”—impersonating some of their targets to trick the phone company into providing records they had no legal right to inspect. Worse from a media standpoint, they also cracked into the cell phone records of nine journalists.
Some of these acts may have violated California law, despite assurances from legal advisors to Pattie Dunn, the board, and brass that everything the investigators were doing was kosher. (To our knowledge, the legal advisors were not aware of the pretexting or any of the other acts that may have violated the law.) At this moment it appeared that criminal indictments were looming.
The H-P scandal was one of the biggest business stories in years, and it was unfolding with blinding speed, already sparking a board resignation, a congressional inquiry, multiple criminal investigations, and hundreds of stories. No matter how anyone tried to spin this one, it was a huge, unmitigated screw-up. Clearly, we were getting to this crisis late.
As my partner Terry Fahn and I prepared to take on the Pattie Dunn case, we could see that three of Sitrick’s Ten Rules for Engagement would be particularly important—Rule 1: First, get the facts; Rule 4: Use a Lead Steer; and Rule 7: If you don’t tell your story, someone else will tell it for you.
First, I had to find out whether what was being said about my new client was true. If not, then what were the facts? How do we go about correcting the record so the wrong story doesn’t keep getting repeated, and then how do we get a compelling, fact-based counter-narrative that tells the correct facts? And where do we place that story? In trying to exonerate Pattie Dunn, we would do long, detailed interviews with respected writers for the Wall Street Journal and the New Yorker, premier platforms in journalism, and then we would put Pattie face to face with Lesley Stahl in an exclusive interview on CBS’s 60 Minutes.
I have seen the cycle of crisis and response speed up and shorten significantly in recent years, especially since the rise of the web and social media. The damage done by delaying your response is now far worse and happens far more quickly than before, yet the time required for recovery hasn’t gotten any shorter. Our strategy for Pattie Dunn corrected the record and changed the narrative and, more importantly, public perception. In one of the most satisfying campaigns of my career, we helped a wronged client clear herself of the charges against her, even as she battled a terminal case of ovarian cancer.
That Sunday, as Pattie began filling me in, I saw that she was in much more danger than she realized. It seemed entirely possible that she could be blamed, and the more she told me, the greater my concern grew.
She had endured a rough week. H-P had disclosed the leak investigation in a filing with the Securities and Exchange Commission on Wednesday, September 6, triggering a wave of hysterical and “shocked” media coverage. On Friday, the eighth, two days before Pattie’s first call to me, H-P had confirmed targeting the phone records of nine journalists. Cue hordes of outraged reporters.
The company’s solution was to put Pattie Dunn out in front of this, intentionally or unintentionally adding to the impression this was Pattie’s show. On the Friday before she called me, H-P’s PR people had told her over the telephone that the company needed to talk to the press and that she would be the spokesman. “When?” she asked. “Now,” the PR person responded. The next thing she heard was, “Pattie, say hello to Damon Darlin of the New York Times.”
This struck me as particularly odd. If my partners and I had been on the scene, we would have prepared her for the interviews the way a lawyer would prepare his client for testimony: we would have presented questions she likely would be asked and would have worked with her to make sure her answers were clear, concise, and accurate. If a question was legally sensitive, we would have advised her to tell the reporter she couldn’t comment for just that reason, and if she didn’t know the answer to tell the reporter that and not speculate. We would have also been on the phone during the call with her so we could follow up. Pattie told me the H-P crew didn’t do any of that. They just let her wing it.
“Mike, That Won’t Ever Happen”
Twenty minutes into our first phone call, I realized that the interests of Dunn and H-P could be divergent and that she very well might need her own advisors, both for legal counsel and for PR strategy. I warned her that she should brace for this possibility. Pattie responded in her ever-optimistic way: “Mike, that won’t ever happen.”
“Then if it doesn’t, it won’t matter,” I said. “Humor me.” She agreed, in an abundance of caution, to retain her own lawyer. “But I want someone based in San Francisco,” she said. I recommended James Brosnahan of Morrison Foerster. Jim’s awards over his distinguished career—too numerous to mention here—include being named one of the top thirty trial lawyers in the United States by Legal 500 US and induction into the California Trial Lawyers Hall of Fame. Having worked with him on numerous criminal and civil cases, I admired his savvy not only in a court of law but also in the court of public opinion. I told Pattie about a high-profile case the two of us had worked on, and how, during depositions, every time he walked behind this difficult and obnoxious witness, he would “accidentally” kick the back of the guy’s chair, unsettling him. I got Jim and Pattie on the phone together that afternoon, and she retained him.
Sitrick And Company started out representing Hewlett-Packard, but we insisted on a “carve-out” clause that would allow us to represent Dunn should her interests conflict with the company’s. Immediately upon hanging up from the call with Pattie Dunn, I had a partner at my firm, Terry Fahn, begin the fact-finding deep dive with which we begin every case. Fahn happened to be visiting the Malibu beach house that Sunday with his family. Clad in swim trunks and flip-flops, he grabbed his laptop and began searching hundreds of sources online for all that had been reported and repeated in the media about the H-P scandal.
We had to have as many facts as possible, gathered from media coverage and by interviewing the client and her team, to know which inaccurate impressions we needed to correct and how we might use the facts to correct the story. Rule 1: First, get the facts.
It was all too clear that this story had already spun out of control. When that happens, wrong “facts” and impressions are repeated over and over, and it can be impossible to correct each individual misstatement. We needed to educate the reporters who already had written stories about what they got wrong and correct the story—“redirect the narrative,” if you want it in fancy PR terms—but doing so would be especially tricky. The facts of this case were damaging, and reporters have an especially intense interest in a story about a company spying on . . . reporters.
Fahn, a firm veteran who had interned under me when he was only nineteen during the Orange County bankruptcy, was well equipped for the research, having done a lot of it in his years as a litigator at a respected Los Angeles–based law firm before joining me. The more he turned up, the more we both believed that Pattie was getting railroaded. The leak-plugging probe had been undertaken at the urging of the board, with its full approval and knowledge. It had been overseen by H-P security executives and monitored by H-P’s general counsel, and it had been conducted by outside contractors H-P’s internal security had used for years. Pattie, the board, and the brass had been assured that everything the investigators were doing was both legal and proper. She had a full-time job at the top of Barclay’s wealth management, and as an outside director and the nonexecutive chairman of H-P, she had no operating authority, no one reporting to her, no assistant, and no office at the company.
So how had Pattie Dunn become the scapegoat?
There it was at the top of a September 6 column in the Wall Street Journal: “an extensive investigation into press leaks that was undertaken by new board Chairman Patricia Dunn.” The sole H-P executive quoted, she had told the reporter: “The situation is regrettable. But the bottom line is that the board has asserted its commitment to upholding the standards of confidentiality that are critical to its functioning. A board can’t serve effectively if there isn’t complete trust that what gets discussed stays in the room.”
It’s not uncommon after a scandal of this scale for the company to feel it has to find a scapegoat. I had no evidence that this was the case here, but still I worried that Pattie might become H-P’s target for blame, whether intended or unintended. She told me she trusted H-P’s Mark Hurd implicitly. She had helped put him in the job, she respected him greatly, and he was her good friend. Later the same day, I had a call with Hurd and listened as the CEO said all the right things about Pattie. Yet my instincts told me I needed to protect Pattie.
Rather abruptly I realized that this well-meaning, earnest woman was just doing what the company’s CEO and her dysfunctional board had asked her to do: plug the leaks. She used H-P’s internal security group, which reported to the company’s general counsel. The internal security group hired the investigators. The general counsel and the CEO were copied on all reports. But now Pattie was being depicted as power-mad and out of control. To me, it just didn’t seem right.
This almost instant, empathic reaction came to me naturally. At my firm, we often adopt a protective and reassuring approach if we feel clients have been wronged. From the moment I began examining the spying scandal and searching for ways to respond, I felt intuitively that the media had it backwards, that there must be another villain at work.
The seeds of this scandal had been planted more than a year earlier, five years into the tumultuous reign of superstar CEO Carly Fiorina.
H-P had been founded in the proverbial Silicon Valley garage on January 1, 1939, by two engineers, William Hewlett and David Packard, and Fiorina was the first outsider to run the company. As she once told Forbes magazine in a cover profile, “Leadership is a performance.” Words to live by when she ran for the Republican nomination for president in 2016.
On January 24, 2005, a page-one story by Pui-Wing Tam in the Wall Street Journal revealed intimate details of a strategic retreat for H-P directors and senior management. It told of directors’ qualms with Fiorina, who had been resisting their push for her to delegate more and let retired director Tom Perkins rejoin the board.
Furious about the leak, Fiorina had an outside lawyer look into the breach. He questioned directors, but everyone professed innocence, including, obviously, the leaker. When Fiorina was fired in early February (in a parting insult, private details about her sudden, unceremonious exit were leaked to the press), the board elevated Pattie Dunn to the new position of nonexecutive chairman and set up a search for a new CEO. They also reappointed Tom Perkins to the board.
The seventy-four-year-old Perkins, a co-founder of Silicon Valley’s Kleiner Perkins Caufield Byers, was the fifth (ex-)husband of the romance novelist Danielle Steele and himself the author of Sex and the Single Zillionaire, a “supremely trashy novel,” as the New York Times called it. The billionaire venture capitalist was “a wild, old cowboy,” in Pattie’s view, flouting the rules and flaunting the inappropriate, while she was earnest and strait-laced. Perkins, she told me, had complained that she was too much “by-the-book.”
Code Name: “Kona”
A month later, at the urging of seven of her nine fellow directors, Pattie Dunn asked H-P security officials to look further into the boardroom leaks. She suggested bringing in the renowned Kroll & Associates, but H-P security recommended a small firm that had worked with them before. The board gave the project the code name “Kona” because it got underway as Pattie was on vacation in Hawaii.
On March 30, H-P tapped former NCR Corp. executive Mark Hurd as its new CEO. Hurd was told about the investigation and voiced his support. By September, Kona had faltered, and in November, Hurd was told the results were inconclusive.
Then came another big leak. On January 23, 2006, one day shy of the anniversary of the leak in the Journal that had so infuriated Fiorina, CNET.com reported secret details of a board retreat held a few days earlier. Hurd and the H-P directors were outraged. To them it felt like a betrayal. The chairman, Patricia Dunn, with everyone’s support, asked H-P security to start a new investigation, code-named “Kona II.”
By May, the results of Kona II were in. The leaker, according to the report, was George A. “Jay” Keyworth II, the longest-serving H-P board member (since 1986) and reportedly a close friend of Tom Perkins. H-P’s own PR people had introduced Keyworth to Kawamoto (obviously not for that purpose), and the two had kept in touch.
Tom Perkins had asked Pattie Dunn to withhold the leaker’s identity and give Keyworth a wrist-slap in private. Pattie sought the advice of the board’s outside counsel and the company’s general counsel, as well as Mark Hurd. All of them recommended that she take the matter to the board, which she did. On the day the board met, Hurd huddled with Keyworth beforehand, telling him the investigation had found the culprit and hoping the director would step up, take the hit, confess, and apologize.
Keyworth didn’t say a word.
In the board meeting a few hours later, Pattie Dunn revealed that the investigators had identified Jay Keyworth as the leaker. Tom Perkins jumped up from the table, resigned, and stormed out. If he thought his fellow directors would ask him not to quit, he was disappointed. They took a hard line, voting immediately to accept Perkins’s resignation. The board then asked Jay Keyworth to resign. Unfazed, he refused, saying that the shareholders should decide.
Pattie believed that this turn of events outraged Tom Perkins, who was accustomed to getting his way, and set him on a path of revenge—not because of the leak probe, but because she had not bowed to his request to keep the outcome of the investigation under wraps.
Hewlett-Packard had to disclose Perkins’s resignation in a filing with the SEC, and it could have revealed the findings of the leak investigation then. In my opinion, it should have done so. Instead, H-P issued a terse statement in which Hurd praised the man who just had quit:
H-P (NYSE:H-PQ) (Nasdaq:H-PQ) announced today that Thomas J. Perkins resigned from its board of directors on May 18, 2006, with immediate effect.
The board has 10 members following his resignation.
Mark Hurd, H-P chief executive officer and president, said, “On behalf of H-P, I wish to thank Tom for his service and dedication to our company. Since he first joined the company nearly 50 years ago, going on to serve as leader of H-P’s early computer operations, an executive at H-P Labs and ultimately as a director, we have benefited from Tom’s business insights and understanding of technology. He has been instrumental in championing improvements that are leading to a stronger H-P. I am particularly grateful for the support he has provided to me over the past year.”
Pattie, Jim Brosnahan, and I were perplexed by this announcement. It was so incomplete that the SEC eventually censured H-P for violating disclosure requirements. Worse, though, the company’s reticence left it vulnerable by creating an asset—the secret of its investigation—that now was in the possession of a person—Tom Perkins—who was upset with the company, its board, and management and could give it to the media. We believed that Perkins was stoking this controversy with manufactured outrage merely as a tactic for getting back at Pattie and forcing her off the board. We felt this was an important element in the story.
Turning this story around would have been easier if we had been hired before the crisis exploded. Am I suggesting that H-P should have hired us before there was a crisis to manage? Yes, actually, I am. While not specifically talking about H-P, here, in my experience, companies often know that a crisis is coming, but fear and denial are powerful components of human nature. They immobilize senior executives, encouraging them to hunker down in the foolish hope that the crisis will go away. Which it rarely ever does, unless you can pull off a miracle. Or, they use the same PR firm they have been using to promote their products to handle the crisis, which in nine times out of ten it is ill-equipped to do. By the time Pattie brought us in, this genie had escaped the bottle. There was no stopping this story now, but we felt we could turn it.
In tending to hundreds of clients in crisis, I have developed a sense of the underlying cycle that drives most crisis cases, a cascading series of reactions and actions that play out with an almost mathematical order. You no doubt have heard of the five stages of grief. I have identified five stages of crisis:
Stage One: Denial. Companies often don’t realize a crisis is about to descend; executives don’t feel it is that bad, or they think if they ignore it, it will just go away. Maybe it will be just a one-day story.
Stage Two: Shock and silence. Stunned that controversy has jolted their company, executives go silent. They may feel that they don’t know enough to comment. Their media advisors may tell them that reporters are out to get them. They may believe that nothing they can say will make it any better (which may be true); they might even make it worse. Or the lawyers will tell a company’s leadership to forgo saying anything publicly. Sometimes going silent is required, but more often, “no comment” is bad advice (see Rule 9).
Stage Three: Turning inward. The company decides it will ignore the media and communicate only to its customers and employees. This can be problematic for two reasons: (1) There is a high probability that those communications will be “leaked to the media,” in which case someone else will be framing and explaining your message. (2) Even if the internal communication is not leaked, if the situation attracts media attention, someone else will be framing your message. The Wall Street Journal is saying things are terrible, while your internal message says things are just fine. Whom are your employees likely to believe?
Stage Four: Help! Belatedly, the brass turns to its lawyers or board to recommend a crisis communications consultant to deal with the situation, which has deteriorated into a full-blown emergency. This is when Sitrick’s Rule 1 for Engagement kicks in. Get the facts. This should have been the first thing management did when the crisis hit.
Stage Five: Healing and fixing. With outside help, the company focuses on getting the “facts” communicated to its various constituents, including the fact that it has corrected what went wrong.
By the time Pattie Dunn made her opening call to me, the H-P scandal had tumbled into Stage Four. I knew then that getting a grip on this story and redirecting it was going to take some drastic moves that usually were unheard of in these cases.
Events were outpacing us, though. That day, Newsweek issued a press release announcing a devastating cover story that would appear on newsstands September 11, excoriating Pattie Dunn with the headline “The Boss Who Spied on Her Board.” It played up “Pattie Dunn’s obsession” with plugging leaks and said, “Lying, spying, name-calling, finger-pointing—all of it is a tragicomedy that Shakespeare might’ve penned had he gotten an M.B.A.”
A real hatchet job, in our view, and wrong on so many counts. Pattie wasn’t the boss, and she didn’t oversee the spying. The story had Dunn jousting with an ex-board member, the billionaire venture capitalist Tom Perkins, heroically resigning to protest the spying and turning into a whistleblower.
On that same Monday, September 11, as outrage spread in the media, the U.S. House Committee on Energy and Commerce sent a letter to Patricia Dunn demanding thousands of documents within a week and seeking “an interview related to these matters.” Reading the letter, I couldn’t help but notice that the four congressmen’s signatures were large enough to rival John Hancock’s on the Declaration of Independence. Everybody was jumping on her case.
Positioning and Wording Are Paramount
At 1:46 p.m. that same day, Terry Fahn sent me an email with the subject line “URGENT call.” H-P’s internal PR head, he told me, had set a call for 3:30 p.m. with Mark Hurd, Pattie Dunn, and others. “They want us to look over and comment on a press release, script, and media plan. Let’s talk when you get back.” The sad but not surprising announcement would be that Pattie Dunn, ever the good soldier, was going to hand over her prized title of chairman to Mark Hurd in a few months and stay on the board.
Positioning and wording are paramount in a press release, and no detail is too picayune to question and agonize over. Terry Fahn has kept draft documents from this time, and they show the painstaking approach that we took, easing the harshness of the event, and changing and adding responses to their proposed questions and answers.
In the avalanche of media coverage the next day, Tuesday, the twelfth, Fahn and I handled calls and emails from roughly seventy reporters and producers, including five at CNBC, three at Bloomberg, two apiece at Reuters, the New York Times, and the Washington Post, and one at the Wall Street Journal. It was crucial to avoid anyone’s reporting “no comment” or “couldn’t be reached for comment.” Fahn and I both knew it was our job to respond as early, as often, and in as much detail as possible, especially to the biggest players. After filling a spreadsheet with every reporter’s name, affiliation, email address, and phone number, Fahn made sure to return every single call and every email that I couldn’t. He has told me he learned this from me. It’s a matter of going the extra mile to represent and protect the client, to say nothing of showing respect for the reporter. He spent an entire hour on the phone with one NPR host, and heard a softer tone from him soon after.
One noteworthy name on Fahn’s call list: Rich Bonin, senior producer for 60 Minutes, who worked with Lesley Stahl. I had known Bonin for years and had worked on 60 Minutes stories with him. He had been working on a story about Carly Fiorina, whose new memoir offered her side of the story of her ouster from H-P in February 2005. Now Pattie Dunn was in trouble at the same company, and, according to Bonin, both women were saying that Tom Perkins had played a role in the turmoil. By coincidence, Bonin also was working at that moment on a story about the largest private yacht in the world. Its owner: the very same Tom Perkins.
Interestingly, I had already been talking with Dunn and Brosnahan about the high-risk, unheard-of move of putting Pattie on 60 Minutes in the middle of the scandal. It was the ultimate Lead Steer—on the air for four decades, still ranked as one of the most-watched programs in America, airing every Sunday night to eleven million viewers, and celebrated for taking on CEOs and rapacious businesses with an investigative vengeance. And, if Pattie appeared, it would be watched by most, if not every journalist covering the story. After talking to Jim and Pattie, I approached another 60 Minutes veteran, Vicki Gordon, executive story editor, about the possibility of Pattie appearing on the program if Jim and Pattie approved. Needless to say, it wasn’t a hard sell.
As I explain to my clients, choosing a Lead Steer is not just about audience size, it is about the respect the journalist and the media outlet command among other journalists. Getting a favorable story from someone who is known for “softball” interviews won’t influence other journalists to write about your client in a favorable way, as a Lead Steer media outlet or journalist would. Tell your story through the New York Times, Wall Street Journal, Financial Times, Washington Post, Los Angeles Times, or 60 Minutes, and it could change the direction of the herd and ultimately change public perception.
That was our thinking in putting Pattie on 60 Minutes. I approached Vicki Gordon because I knew her well, having worked with her on numerous stories. I trusted her and she trusted me, and I trusted Bonin and 60 Minutes to be fair. Bonin was aware that Vicki Gordon and I were communicating. Though he worked in Washington and Gordon worked in New York, they were good friends.
When I called Gordon, I told her I was representing Pattie Dunn (she laughed and said, “What a surprise”) and wanted to explore putting her on 60 Minutes. Because our client faced possible criminal charges, I explained that we would have to have an off-the-record meeting first to ensure that we all felt comfortable with one another. I told her I wanted to make sure Brosnahan in particular didn’t feel this could undercut his legal strategy.
Serving our clients often depends on maintaining this close network of trusted journalists at the most important media platforms. If we trust the reporters, we’re more confident that even the toughest stories will be fair, that the client’s version of the story will get told, that there won’t be any surprises, ambush interviews, or cheap shots.
In Pattie’s case, I had to think bigger. It was risky, but we had no choice. Sitrick And Company was getting to this party late.
When Pattie had first called Jim Brosnahan, he was in a trial in San Jose, working sixteen-hour days. “Who’s Pattie Dunn?” he asked the assistant who informed him of her call. The assistant responded, “She’s on the cover of Newsweek magazine.”
Brosnahan had worked with me on half a dozen or more cases by now. He was a courtroom killer-with-kindness, able to lacerate his adversary but without overdoing it. Moreover, he was a strategist with a view beyond just the legal issues. Jim Brosnahan was willing to go further than most lawyers in devising a media strategy. I readily yielded to him on legal matters, because the bigger goal is to win the case in court, even as we support the client in the court of public opinion. He in turn yielded to me on media matters, as long as it didn’t jeopardize the legal outcome. The two of us worked together like a precision instrument.
Telling Pattie’s Story
On Friday, September 22, ten days after Dunn had agreed to give up her chairman’s title by the following January, her situation got even worse. The H-P board decided it was necessary for her to hand the chairmanship over to Hurd immediately and to resign from the board. H-P’s conflict with Dunn now was clear. Also resigning from the board was the chief leaker, Jay Keyworth, but the media made less of that development, focusing instead on Pattie Dunn. In fact, it was beginning to look like California Attorney General William Lockyer might pursue criminal indictments, perhaps targeting Pattie Dunn at the top. We needed to take more drastic measures to draw attention to Pattie’s story and the injustices she faced.
Now, more than ever, the idea of putting Pattie Dunn under the hot lights of 60 Minutes appealed to me. It offered us the chance fundamentally to alter the main story line across the entire mediascape with a single stroke.
Now that H-P had forced Pattie Dunn off the board, Jim Brosnahan and I both emphasized to her that she just had been wronged. Even at this point, however, she refused to blame the H-P board. She simply did not want to believe that her fellow directors would turn on her. Brosnahan saw this as touching resilience, thinking she had one of the most affirmative life attitudes of anyone he had ever met. Pattie would need to draw on it, big-time, to have any chance of getting through what was coming her way.