In 2006 the public learned just how far a company will go, and just how dearly a company could pay, to root out information leaks.

The Hewlett-Packard spying scandal started with the company trying to find the anonymous source of a January article, and ended up costing the company three board members, two lawyers, millions of dollars in settlements and countless amounts of bad press.

"Right away, this was a shock coming from HP," Dr Sally Baack, an associate professor in the management programme at the San Francisco State University college of business, told vnunet.com.

"HP is a company that has based its reputation on one of the highest standards for values and ethics over the years."

The story broke in early September, when reports began to surface that the company was investigating tactics that private investigators had used at the request of chairman Patricia Dunn to discover the source of a media leak later determined to be board member George Keyworth.

Most notably, the allegations said that investigators used pretexting methods: lying about their identities in order to gain access to phone records.

The boardroom problems at HP, however, began long before the investigations, according to Baack. The professor said that a "dysfunctional" board emerged under the leadership of Carly Fiorina, and continued under Dunn.

"The board under Fiorina had serious problems and serious breakdowns and demonstrated a failure of trust between board members and between board members and executives," said Baack. "Part of the problem at that time was leaks, even way back then."

Soon after the news broke, experts began to speculate that the investigation could cost Dunn her position within the company.

Those speculations were confirmed on 12 September, when the company announced that Dunn would be leaving HP in January and that Keyworth would be resigning from his position immediately.

Two days after HP announced Dunn's January resignation date, Calfornia Attorney General Bill Lockyear said that the state was investigating the matter and that "crimes have been committed".

A critical moment in the scandal occurred on 22 September when HP first publicly acknowledged wrongdoing, and announced the immediate resignation of Patricia Dunn.

"It was an effort on HP's part to make some deals about going forward," explained Baack.

"Up until that point there had been day-by-day releases of information that allowed the story to stay at the top of the news. By eliminating Patricia Dunn as a board member effective immediately, HP admitted that it had a problem."

Chief executive Mark Hurd outlined his own involvement in the investigations (dubbed Kona I and Kona II) and outlined the procedures used in both.

The investigations were said to have involved pretexting, sending "tracer" emails that contained spyware, placing surveillance on journalists, and even allegedly discussing the placement of spies in two newsrooms.

Hurd claimed that, while he was informed of the investigation, he was ignorant as to the tactics being used.

"I should have been able to catch it, and I did not," Hurd would later say. "In the end, I am responsible for everything that goes on at HP."

While Hurd's admission may have helped the company by shedding some light on what had happened, the fact that he had refused to answer any questions from the press left many people wondering if there was more to the story.

"It could be that he doesn't want to share what he knows," said Baack. "It could be that he knows even less than we thought he did. Either way, it's not good."

One week after Hurd's press conference at HP headquarters, he and Dunn were among those called to testify before a congressional hearing on the matter.

In front the committee, Dunn maintained that she had not knowingly done anything wrong.

"If I knew then what I know now I would have done some specific things very differently," she said, but later declaring that she would not accept responsibility for the investigation.

Hurd would also show support for Dunn in front of congress. "Board members have a fiduciary responsibility not to disclose internal deliberations which can affect trust," he said. "The end came to justify the means."

Unfortunately for Dunn, attorney Kevin Hunsaker and three private investigators, law enforcement agencies did not share Hurd's sentiments.

All five were indicted on felony counts of identity theft, conspiracy, unlawfully accessing computer data, and fraudulently obtaining phone records.

HP was able to shield itself and its employees against any further civil actions when on 8 December the company agreed to pay the state a $14.5m settlement.

As part of the deal, HP agreed to impose several measures to monitor the company's internal affairs and ensure that future investigations would be conducted ethically and would not violate privacy laws.

The real legacy of the HP scandal, said Baack, could be the fact that unlike previous corporate scandals, there was not a clear idea of whether laws had been broken.

Pretexting was not technically illegal under federal law at the time, and HP's violations appeared to be as much about a lack of ethics as they were about breaking the law.

"What I think is interesting for boards moving forward is the ethical values and judgment issues that have gone along with it, not just the legal issues," said Baack.

"These are tough decisions. If there were easy decisions or there were clear right answers, we wouldn't have boards making these decisions."