Spy case against Dunn dropped as HP investors meet

By Duncan Martell

SANTA CLARA, California (Reuters) - A judge dismissed charges against former Hewlett-Packard Co. (HPQ.N) Chairman Patricia Dunn on Wednesday for her role in a boardroom spying scandal that has shaken a once-proud Silicon Valley company.

The ruling came just hours before shareholders of the world's largest maker of personal computers met nearby at their annual meeting to assess the state of HP after one of the most tumultuous years in its history.

"No one's proud of what happened last year. No one," Chief Executive Mark Hurd told the meeting at a Santa Clara hotel.

HP came under state and federal scrutiny because of the tactics used to find the source of media leaks in 2005 and 2006. HP hired investigators who impersonated reporters, board members and employees to obtain private phone records.

But in a ruling that triggered concerns about whether U.S. privacy law is strong enough, Santa Clara County Superior Court Judge Ray Cunningham dismissed the charges against Dunn and offered three other defendants the same if they completed 96 hours of community service and paid restitution.

He said Dunn, who is battling breast cancer, would not have to perform the community service, citing health concerns.

"It shows how difficult it is to vindicate privacy rights given the state of American law right now," said Joel Reidenberg, a Fordham University School of Law professor and privacy law expert. "There is very wide consensus that what HP did was wrongful -- the company has admitted it was wrongful."

"Yet privacy law does not give an easy redress right now."