Hurd Hit By Yet Another Lawsuit

New Oracle co-president Mark Hurd is becoming a regular magnet for litigation.

Hurd, who attracted media attention when he left his chief executive job at Hewlett-Packard under questionable circumstances, is one of a dozen defendants named in a lawsuit brought on 19 October by a Midwest-based pension fund regarding kickbacks he and others are alleged to have paid to key influencers to earn business for HP.

The HP corporation, its board of directors, and 11 of its current and former officers – including then-chief executive Hurd – are being sued by the Saginaw Police & Fire Pension Fund, which contends that the company violated the False Claims Act and anti-bribery statutes by paying “influencer fees” to government contractors and vendors in order to garner federal contracts.

Breach of fiduciary duty

In a suit filed in federal court in San Jose, California, the pension fund – a large HP shareholder – alleges that Hurd breached his fiduciary duty to shareholders by allowing practices at HP that were found by federal regulators to have violated the False Claims Act and Anti-Kickback Act.

The suit alleges that Hurd banked about $97 million (£62m) in compensation as a result of deals that involved paying influencers.

The pension fund claims that HP board members also abandoned their duty to shareholders by “rewarding Hurd for his conscious decision to allow HP employees to engage in illegal activity”, costing the company tens of millions of dollars in fines and tarnishing its reputation, according to court documents.

The plaintiff estimates that HP recorded payments of more than $880m from government contracts between 2007 and 2009 and suggested that the company’s government-contracting business may now be threatened by the charges levelled against it by the US Justice Department.

The DOJ has been on the warpath against IT companies in the last several years, finding cause to penalise such companies as Microsoft, EMC, Sun Microsystems, HP, Accenture and others for illegal business practices. In fact, the DOJ is currently suing Oracle for allegedly overcharging government agencies.

Forced resignation

The 19 October lawsuit against Hurd and HP asks for unspecified damages, as well as the return of compensation earned by Hurd and other defendants.

Hurd was forced to resign from HP on 6 August following allegations of sexual harassment and a subsequent financial cover-up involving an actress employed as a contractor by HP for special events.

Thirty days after he left HP, longtime friend and Oracle chief executive/co-founder Larry Ellison hired him to become co-president at Oracle with Safra Catz. Ellison criticised the HP board, calling its move to oust Hurd as “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago”.

A few days later, HP retorted with a civil lawsuit against Hurd, accusing him of violating a non-competition agreement in his HP contract by joining Oracle a mere 30 days after accepting a $40m severance package. The two companies, which partner on a number of customer projects, settled the matter out of court 13 days later, and Hurd gave up a large portion of his severance.

Oracle and HP representatives declined to answer questions about the 19 October lawsuit.