Why Mark Hurd's consigliere had to turn against him

August 10, 2010: 12:50 PM ET

Former prosecutor Michael Holston was brought in to enforce an ethics code. His old boss might regret that.

Mark Hurd speaks as Mike Holston looks on. Photo from 2006.

In the 1992 film The Crying Game (memorable for its sexual twists, but I digress without even having gotten started), Forest Whitaker's character famously tells the story of the turtle and the scorpion. The latter mortally stings the former, who with his last breath wants to know why. "It's in my nature," replies the scorpion.

Did a version of this just happen to Mark Hurd at the hands of his own general counsel, Michael Holston? A square-jawed former federal prosecutor, Holston fostered a reputation for extreme uprightness (as well as that of a high-decibel enforcer) at HP (HPQ), the keeper of the company's rejuvenated commitment to ethics following its 2006 pretexting scandal.

As portrayed in Anthony Bianco's recent book "The Big Lie: Spying, Scandal and Ethical Collapse at Hewlett Packard," Holston was the man who saved Hurd's bacon in 2006.  Hurd hired Holston -- a corporate litigator in Philadelphia and a longtime lawyer for HP on various product-oriented litigation issues -- to investigate the spying episode that threatened to bring down Hurd one year into his tenure as HP's CEO. Before long, HP Chairwoman Patricia Dunn was out, replaced by an unscathed Hurd. General Counsel Ann Baskins left too, replaced by, yep, Holston.

Fast forward to 2010 and Holston had accumulated tremendous power at HP (HPQ), where he acted as an unofficial gatekeeper for Hurd as well as a business confidant, beer-drinking buddy and fellow parent at a prestigious Valley private school. With an executive vice-president title and a relocated office near Hurd's, Holston even had some HP watchers speculating if the lawyer, who is 47 years old, had aspirations for the CEO job himself.

Holston's rise was unsurprising to his East Coast crew. Lisa Dykstra, a litigation partner at Morgan Lewis, where she worked with Holston, recalls Holston as a "phenomenal trial lawyer" who long represented HP and considered the company his most important client. "He just really knew the ins and outs of the business," she said in a 2009 interview for an article on Mark Hurd in Fortune [See "Mark Hurd's Moment"]. "He's driven, smart, careful and very thoughtful," she said, calling him "one of the most insightful people I've ever worked with." Another Morgan Lewis litigator, Leslie Caldwell, emphasizes Holston's broad business chops. "You don't often run into a lawyer who is the complete package the way Mike is," she said, also early last year.

Holston's energies extend to the political arena. He recently hosted a fundraiser for California Attorney General and gubernatorial hopeful Jerry Brown. Several years ago he became close to U.S. Attorney General Eric Holder when the two were co-counsel on a  major case involving drugmaker Merck (MRK).

The problem for Hurd in having this all-American type around gets back to the scorpion. Elevate an upright former prosecutor and empower him to be a stickler on ethics and now you've got a former prosecutor in your business. It's in his nature to root out wrongdoing. According to HP, the board authorized Holston and an outside law firm to investigate the allegation of sexual harassment leveled at Hurd. (The outside firm that conducted the investigation was Covington & Burling, where Attorney General Holder worked before his current role.)

Holston has been front and center since. In an unscripted portion of the Q&A last week with investors, for example, Holston sounded like a prosecutor declaring victory on the courthouse steps. He said Hurd's resignation was caused by a "systematic pattern of improper expenses and inaccurate reports as well as the disregard for the values of the HP of trust, respect and integrity that Mark himself admitted he didn't live up to." The same day he told reporters Hurd had "exhibited a profound lack of judgment."

On Monday, when employees returned to their newly beheaded company, HP hosted on a worldwide internal telecast. Among the executives who spoke: the interim CEO Cathie Lesjak -- the HP's CFO who is in a self-professed caretaker capacity -- and Holston.

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About This Author
Adam Lashinsky
Adam Lashinsky
Senior Editor at Large, Fortune

Adam Lashinsky is a San Francisco-based editor-at-large for FORTUNE, covering Wall Street and Silicon Valley. Lashinsky joined FORTUNE in 2001, after two years as a contributing columnist. Prior to joining FORTUNE, Lashinsky covered Silicon Valley for TheStreet.com and The San Jose Mercury News. A Chicago native, Lashinsky holds a B.A. in history and political science from the University of Illinois at Urbana-Champaign.

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