The chief financial officer of Hewlett-Packard is one of five individuals accused of insider trading in an amended complaint filed earlier this week, according to The Houston Chronicle. The suit accuses CFO Bob Wayman, CEO Mark Hurd, and directors Lucille Salhany and Lawrence Babbio of participating in board decisions to buy back the company’s stock to boost its price at the same time they and former in-house counsel Ann Baskins were selling $41.3 million worth of HP stock, according to several reports.
“While defendants were causing HP to buy billions of dollars worth of stock in the open market, defendants Hurd, Babbio, Baskins, Salhany and Wayman sold more than $38 million worth of stock back into the market,” the lawsuit says, according to the paper. The suit claims Wayman sold 942,570 shares in six transactions from May 2005 to September 2006 for proceeds of more than $29 million, according to the Chronicle.
The lawsuit, originally filed in September by plaintiff law firm Lerach Coughlin Stoia Geller Rudman & Robbins on behalf of a group of shareholders, alleges that the defendants sold shares because they knew “the market’s perception of HP would be significantly damaged when (not if) the market became aware of the full extent of distrust and acrimony among board members, the outlandish smear campaign tactics the acrimony had spurned and the illegality of the investigatory tactics being used,” according to Reuters.
In response, HP reportedly said in a statement that the “lawsuit represents a transparent effort to exploit issues related to HP’s recent investigation for personal gain at the expense of HP, its shareholders and its employees. HP will defend itself vigorously.” The lawsuit asserts, for example, that the board authorized the repurchase of $6 billion worth of HP stock in late August, which was just a few weeks before the spying scandal became public, according to the Chronicle. The suit also reportedly asserts that during the same period, directors and executives “kicked off an aggressive two-week period of stock sales during which they disposed of over 1 million shares of HP stock on the market.”
The defendants are accused of selling their shares while in possession of critical nonpublic information about the spying scandal, which began in early 2005 and became public in early September, according to the report. The suit also allegedly asks the court to declare that Wayman and the other defendants “committed breaches of their fiduciary duties to HP,” and therefore force the executives to pay back “the amounts by which the company has been damaged.”