HP Settlement: How Sweet It Really Is

HP Settles California 'Pretexting' Charges, Pays $14.5 million. Swift, terrible justice?

Piffle.On the surface this seems like a good thing for the public, and a bad thing for HP. After all, it will have to hand over $14.5 million dollars to settle the case.

But what's $14.5 million to a company like HP? "They can make that back in an hour," scoffed one financial analyst I know. Well, maybe not in an hour, but let me tell you, he was pretty darn close.

Try 1.3 hours, based on the net revenue for their most recent (fourth) quarter, or almost 19 hours, based on their net income for that period. What's more, that $14.5 mill represents barely six tenths of one percent of HP's net revenue of $24.6 billion for its last quarter. So, on a revenue basis, by the time most readers see this blog entry, sometime tomorrow (Friday) morning, the company will probably have sold enough product to cover the settlement.

So really, HP did quite well for itself here.

As for the wronged members of the public? Not so much. In return for this monetary slap on it's pinkie finger, HP won the following:

• No finding of liability against the company. • Immediate settlement of a civil suit that had been filed by the state Attorney general's office, which mirrored felony charges that had been filed. (It's doubtful anyone HP spied on is in a position to pursue a civil suit themselves.) • Permission to be it's own watchdog, or at least choose it's own ethics monitors (see below) • Little to no shareholder impact.

As part of the deal, HP agreed to five years of "injunctive relief" provisions, which are supposed to include allegedly stronger in-house monitoring and oversight to ensure compliance with legal and ethical standards, and protection of privacy rights, during investigations.

Sounds good, but is this really a penalty? Basically, HP has agreed to do something every corporation in America should be doing as a matter of course. Wet noodle, anyone? And you have to wonder - who is going to monitor HP's monitors? We already know they don't do such a great job of figuring out right from wrong on their own.

The one silver lining in here is what the government intends to do with the money. Here's where the general public will benefit. Fourteen plus million is nothing to Hewlett-Packard, but it's big money to an underfunded, understaffed public agency. Most of the settlement - $13.5 million - will be used to create a new "Privacy and Piracy Fund," which will provide up to $500,000 each year to both the California Attorney General's office, and local prosecutors, who will use the money to prosecute privacy and intellectual property rights violations.

So while the victims of HP's snooping won't see any relief, hopefully future victims of "pre-texting" and identity theft will. That's a good thing, and I guess we'll have to settle for that.