SAN FRANCISCO – Ousted Hewlett-Packard Co. CEO Mark Hurd has settled allegations of sexual harassment lodged against him by a female contract worker for HP, a person with knowledge of the case told The Associated Press.
The harassment accusation set off a chain of events that led to the discovery of allegedly falsified expense reports for dinners Hurd had with the woman and culminated in Hurd's forced resignation Friday from the world's largest technology company.
The person familiar with the case told the AP late Satuday that Hurd agreed to pay the woman but would not reveal the size of the payment. The deal was reached Thursday, a day before Hurd's resignation. The settlement was between Hurd and his accuser and did not involve a payment from HP, this person said.
This person, who spoke on a condition of anonymity, was not authorized to speak publicly about the issue.
The nature of the harassment complaint wasn't clear. Hurd and a lawyer representing the woman said the relationship was not sexual.
The woman's lawyer, celebrity attorney Gloria Allred, declined to describe the alleged harassment. Allred would not identify her client or make her available for an interview.
The woman was paid up to $5,000 per event to greet people and make introductions among executives attending HP events that she helped organize.
HP's board of directors said its investigation found that Hurd listed other people as his dinner partners on expense reports when he'd been out with the woman. HP also claimed Hurd arranged for her to be paid for work she didn't do.
There was only one instance in which that occurred, the person close to the case said, but it was for an event that was canceled at the last minute and the woman's contract required that she would be paid unless an event was canceled 30 days in advance.
The amount of money in question wasn't known.
Hurd, 53, insists they were legitimate business expenses. Hurd says the errors in the reports may have been entered unwittingly by an assistant, according to the person close to the case.
The company determined Hurd didn't violate its sexual harassment policy but broke its rules of conduct and irreparably harmed his credibility and integrity.
HP now must find a new leader to keep HP on the course he mapped out.
Hurd engineered a stunning turnaround of the Silicon Valley stalwart.
Under Hurd, HP has spent more than $20 billion on acquisitions to transform itself from a computer and printer maker dependent on ink sales for profits to a well-rounded seller of hardware and lucrative business services. HP's market value nearly doubled during his five years.
The company stands at a turning point to integrate some of those acquisitions, the most recent of which was the purchase of smart phone maker Palm Inc. for $1.4 billion in June.
HP's stock fell nearly 10 percent to $41.85 in after-hours trading, when the news was released after the close of markets Friday.
The company has a deep bench in management and the stock drop was reactive and doesn't reflect the company's prospects, an analyst said.
"I don't view his departure as catastrophic," said Dinesh Moorjani, an analyst with Gleacher & Co. "The strategy is working fine. The level of uncertainty for me is relatively low just given the circumstances. This wasn't a one-man company."
Hurd, who spent 25 years at ATM maker NCR Corp. before coming to HP in April 2005, became a Wall Street darling. The $13.9 billion acquisition of Electronic Data Systems made HP a major player in technology services, challenging archrival IBM Corp.
HP also now offers computer networking, helped by the $2.7 billion takeover of 3Com Corp., racheting up the rivalry with Cisco Systems Inc. The Palm acquisition catapulted the company into the fast-growing smart phone business.
The additions also broadened the pool of people who could replace Hurd. Internal candidates could have an edge, given that Hurd and predecessor Carly Fiorina — who got the boot in 2005 over concern about her management style and her decision to buy Compaq Computer — both came from outside HP.
Inside candidates could include Todd Bradley, who oversees personal computers and mobile devices at HP; Vyomesh Joshi, who leads the printer division; Ann Livermore, in charge of servers, services, software and storage; and Shane Robison, leader of HP's corporate strategy and marketing. Chief Financial Officer Cathie Lesjak, now interim CEO, took herself out of the running for the permanent job.
In recent weeks, Hurd was in talks for a three-year contract that could have been worth $100 million, the person close to the case said. Those went off track when the woman accused him and HP of sexual harassment, this person said.
Hurd will get about $28 million in cash and stock in severance.
Hurd's ouster is the third in five years at HP's top echelon. First was Fiorina's in 2005, then former Chairwoman Patricia Dunn was ousted in 2006 amid a boardroom spying scandal that involved spying on reporters' and directors' phone records to suss out the source of leaks to the media.
"It says they're off track in some fundamental way," said Stephen Diamond, associate professor at Santa Clara University School of Law and an expert on business law.
"The first thing is, they have to find the right kind of CEO," he added. "And I think what that CEO needs to do is come in and say, 'How many board members were here during the last two scandals? If you were, please resign now."