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Larry Sonsini was about to have a bad day. It was the morning of Sept. 28, and Sonsini was preparing to testify before Congress about his role in the Hewlett-Packard Co. boardroom spying scandal. The House Committee on Energy and Commerce was focused on the company’s use of pretexting, in which investigators lied about their identity to get phone records for HP directors and journalists. This would not be fun, but it could be worse. Sonsini could be Ann Baskins. As the company’s top legal officer, Baskins would be seated next to Hewlett-Packard’s recently deposed chairwoman, Patricia Dunn, and Baskins would bear the brunt of the questions about the legality of the underhanded techniques the company used to discover the source of boardroom leaks to the press. Early that morning, however, Baskins’ lawyers suddenly announced that she had resigned from HP and would refuse to testify. Now Sonsini, the company’s longtime lead outside counsel, was left to serve as the legal spokesman for HP. He, not Baskins, would be the one pictured next to Dunn, tensely holding up his right hand, indelibly linked to this sordid corporate affair. Sonsini’s day had just gone from bad to horrible. Sonsini arrived with two lawyers: Michael Madigan, of Akin Gump Strauss Hauer & Feld, an experienced Hill lawyer; and, in a telling sign of the seriousness of his predicament, Evan Chesler, the newly elected presiding partner of Cravath, Swaine & Moore. On this day, Sonsini and his lawyers would have to sit silently as politicians scolded him during their opening statements. “Why [did] no one . . . [have] the good sense and courage to say, �Stop!’?” asked Rep. Ed Whitfield (R-Ky.). “How, after all was said and done, could the board’s outside counsel, Mr. Larry Sonsini, review the investigation and say that pretexting for phone records of board members, employees, and journalists was above board and legitimate?” For a man who has plotted his career and his firm’s path to dominance with the precision and focus of a master watchmaker, this is a place that Sonsini, 65, never expected to be. For nearly 30 years, he has steered Wilson Sonsini Goodrich & Rosati from its humble beginnings as a suite of rooms in a medical office building to become the powerhouse of Silicon Valley. Sonsini and his firm have faced criticism before — over alleged conflicts and investments in client stock — but they’ve always come through unmarred. Call it Teflon, but Sonsini has known that his clients stand by him. Such is the power of knowing the right people in the close-knit Valley. Now, however, Sonsini and his firm face a crisis that might not blow over. The Hewlett-Packard muck extends beyond the salacious details of secret surveillance to more mundane but serious questions about securities law disclosure. The Securities and Exchange Commission is investigating HP but has not yet brought any charges. CLOAK-AND-DAGGER Sonsini’s connection to the company goes back to the early 1990s, when Wilson won a beauty contest to defend HP in a shareholder suit. Over the years it handled increasingly bigger deals, including the company’s spinoff of Agilent Technologies Inc. in 1999, and the $22 billion Compaq deal. Wilson’s connection to HP was cemented when Baskins was promoted to general counsel in 1999. Baskins is married to Wilson partner Thomas DeFilipps. According to HP acting general counsel Charles Charnas, the company avoided conflicts by having Charnas, not Baskins, make decisions about Wilson’s hiring and billing. Although Sonsini was the main outside adviser to HP’s board, he told Congress that he wasn’t aware of the leak investigations while they were going on. Sonsini had interviewed board members in early 2005 to try to find the person who leaked details of boardroom discussions, but no one admitted it. He testified that Dunn initiated the undercover investigations without his knowledge. The first probe (called Kona 1) began in 2005, and ended that summer without identifying a leaker; the other (Kona 2) began in early 2006 after the appearance of a CNET article with details about a board strategy meeting. Kona 2 was run by in-house lawyer Kevin Hunsaker, with oversight by Baskins. Hunsaker enlisted HP’s internal investigators, who hired several small, outside investigative firms, which did the pretexting. The documents released by Congress support Sonsini’s assertion that he knew nothing about the investigations until they were finished. Sonsini is not listed as a recipient on any of the e-mails among Dunn, Baskins, and others who discussed the probe when it was under way. According to his House testimony, Sonsini learned about this investigation on March 15, 2006, when he got a handwritten note from Dunn. On April 6, Sonsini got a briefing when he received an 18-page report prepared by in-house lawyer Hunsaker. That report described the HP investigators’ extraordinary measures, including analyzing and indexing more than 1,000 articles written by CNET reporter Dawn Kawamoto, who wrote the January 2006 article that had set off this search. Hunsaker’s report referred to the use of “a covert intelligence-gathering operation” in which a tracing device was sent to Kawamoto to find out if she would forward an e-mail to her source. The report also stated that the investigators had analyzed third-party phone records. It concluded that director George Keyworth was the likely leaker. On May 18, the board heard the results of the Kona 2 investigation. The directors voted 6-3 to ask Keyworth to resign, but he refused. Keyworth didn’t think this innocuous CNET article harmed the company. And why, he asked, didn’t anyone bother simply to ask him if he was the source of the leak, instead of going through this elaborate cloak-and-dagger game? Keyworth’s friend and fellow director, Thomas Perkins, was so upset that he did resign. The resignation of Perkins — a 75-year-old billionaire who is one of the founders of the powerful Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers — presented HP with a tricky predicament. Under federal securities law, a company must describe in an 8-K filing the reason a director resigns if the resignation is “because of a disagreement with the company, known to an executive officer of the company, on any matter relating to the company’s operations, policies, or practices.” At this point, right after Perkins resigned, Sonsini was called in to talk to Perkins, whom he knew from decades of Valley deals. According to Sonsini’s testimony, he asked Perkins if he had any disagreement with the company’s operations, policies, or practices, and Perkins said no. Perkins’ lawyer, Viet Dinh, disputes this. “Tom disagrees with Mr. Sonsini’s recollection,” says Dinh, a professor at Georgetown University Law Center. “At the time Tom resigned, he raised significant questions about the methods of the investigators and, more importantly, the propriety and necessity of such an overkill approach.” On May 22, HP filed an 8-K that announced Perkins’ resignation, but gave no reason for his departure. QUESTIONS RAISED Dinh is also a News Corp. director and chairs that company’s corporate governance committee. (Dinh was not representing Perkins at the time he resigned.) He told Perkins that the gathering of third-party phone records was illegal and unconscionable. (At this point, Perkins and Dinh did not know that pretexting was involved.) Dinh is one of the nation’s legal experts on surveillance tactics. A former assistant attorney general for legal policy at the Department of Justice, the 38-year-old is credited with authoring the USA Patriot Act. Perkins sent an e-mail to Sonsini relating Dinh’s reaction and asked for an explanation. On June 28 Sonsini wrote back, assuring Perkins he had checked with Baskins and that the investigation, including the use of pretexting, appeared to be “well done and within legal limits.” HP’s legal team, Sonsini noted, had consulted with an outside counsel, which he didn’t name. When pressed about this e-mail during the House hearings, Sonsini explained that he had never heard of pretexting before and was relying on two reports he’d received from HP’s legal department. Sonsini told the committee that he “subsequently learned” after sending his e-mail to Perkins that the outside counsel he mentioned was Boston’s Bonner Kiernan Treback & Crociata, which represented the investigator doing the pretexting. In late July, Perkins informed the board and Sonsini that he had hired Dinh as his lawyer. Dinh and his client pressed the company to make a more thorough disclosure to the SEC of the circumstances of his resignation. On August 14, after these requests were ignored, Perkins got serious. In a letter written on Kleiner Perkins letterhead, Perkins put the HP board, Sonsini, and Baskins on notice that he considered the May 22 8-K that announced his resignation to be defective. “I resigned solely to protest the questionable ethics and the dubious legality of the chairman’s methods [in the leak investigation],” he wrote. Because the company had refused to disclose this, he warned, he was legally obligated to go public. Dinh knew that this letter would create a problem for HP. If a director sends a letter to the board detailing his reasons for resigning, the company must file this letter with the SEC within two business days. HP didn’t. Instead, two days later, Baskins wrote back (with Sonsini copied) to tell Perkins that it would be “inappropriate” to change the 8-K because it was accurate when it was filed. Sonsini testified that he believed the company needed not revise the disclosure until it did an internal investigation. “It was not material at that point in time since the investigation was not done,” he said. Baskins also told Perkins in her letter that HP had assigned Wilson Sonsini to do this investigation. The day after receiving that letter, Dinh opted to get the power of the government behind him. He called the SEC’s deputy general counsel of enforcement, told him about this dispute, and gave him the e-mails and letters that had bounced back and forth among him, his client, HP, and Sonsini. He also contacted the U.S. Attorney’s Office in San Francisco, and the California attorney general, to tell them about the pretexting. Dinh objected to the choice of Wilson Sonsini to do an investigation. In an August 23 letter to Sonsini’s partner, Boris Feldman, Dinh questioned how the firm could legitimately investigate events that involved the “key participation” of its chairman. “I only know one way to practice law, and that is to call things the way I see it,” said Dinh on the day after the hearings. “Whether it’s to clients or colleagues in academia, in published writings, or to the media in dealing with issues of national importance.” Over a D.C. lunch in which Dinh quickly downed three glasses of wine, three orders of oysters, and a seafood gumbo, the former government lawyer recalled he was startled when Perkins first told him about the leaks investigation. “I had an instant and almost instinctive recognition [of illegal investigative methods],” he recalled. “Title III of the Omnibus Crime Act prescribes that [the government] must get judicial approval for a [telephone] track-and-trace device, and [access to] phone records requires a subpoena or a search warrant,” he stated. “I could not see how a private entity could get such access without consent.” Dinh stressed that he called the authorities only after months of trying to get HP to do the right thing. “There is literally no internal corporate governance mechanism that can substitute for this type of sunshine,” he noted. Washington, where Dinh has spent his entire professional career, runs by different rules from the world of Silicon Valley. The Valley is all about respecting the business power structure. With rare exceptions, people don’t take disputes public. Alienate a powerful venture capitalist or lawyer, and your career could die a quick, quiet death. Washington thrives on public jousting. Dinh, however, tried to smooth over any dispute with Sonsini. “He was a good lawyer trying to do a difficult job,” he said. On Aug. 30, Wilson Sonsini produced a 15-page report to the board. Most of the work — which involved interviews with Dunn, Baskins, Hunsaker, and CEO Mark Hurd — was done by two Wilson partners with close ties to Sonsini: Steven Schatz and David Berger. The report cleared everyone at HP. The Kona investigations contained “certain flaws” that Dunn and Hunsaker could have avoided, the Wilson report stated. Dunn should have involved HP’s lawyers sooner during Kona 1, and Hunsaker should have done or commissioned more research on pretexting. But they, as well as Baskins and Hurd, reasonably relied on Hunsaker’s assurances that pretexting was legal. Everyone, Wilson concluded, acted with the “best of intentions.” THE FALLOUT The week after the Sept. 28 hearing, California attorney general Bill Lockyer indicted Dunn, Hunsaker, and three of the outside investigators. They were charged with the felonies of stealing computer data, wire fraud, and identity theft. They were also charged with a section of the state penal code that makes it a crime to execute a scheme to get a customer’s records from a public utility. By that point, Hunsaker had resigned from HP. His lawyer, Michael Pancer, emphasizes that his client was not involved in Kona 1, and that by the time he was brought into the Kona 2 probe, the use of pretexting had “already been blessed by the general counsel and the chairman.” Pancer adds, “For this he’s facing criminal charges. It doesn’t seem fair.” Dunn’s lawyer, James Brosnahan of Morrison & Foerster, did not return calls. But he has said publicly that his client, who has advanced ovarian cancer, is the victim of “a well-financed and highly orchestrated disinformation campaign.” Former general counsel Baskins has not been charged with any wrongdoing, but her once-glistening 24-year career at Hewlett-Packard has ended in tatters. Her lawyer, Cristina Arguedas of Berkeley’s Arguedas, Cassman & Headley, stresses that Baskins relied on Hunsaker’s advice that pretexting was legal: “She had 260 lawyers working for her, and Kevin was a senior legal counsel.” Arguedas adds, “I don’t think it’s irresponsible for a general counsel to rely on her senior legal counsel.” Eighteen months ago, Sonsini had flirted with leaving his firm to join a high-tech private equity fund. He stayed to appease his partners, who worried what would happen to Wilson Sonsini without him. Now the firm waits to see what happens with him.
Susan Beck is a senior writer for The American Lawyer , the ALM publication where a version of this article first appeared.

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