Former HP chief Mark Hurd received papers this last week for a shareholder lawsuit that reopens allegations against him by the US Federal Government.

In September Data Center Dynamics reported on how the lawsuit against HP was perceived as vindictive by some, notably Oracle boss Larry Ellison, who argued that it contributes to an atmosphere of fear and distrust in a market where partnership and creditability are powerful currencies.

As chief executive of HP, Hurd was allegedly rewarded for allowing illegal activity at the company.

The new shareholder action, by the Saginaw Police &Fire Pension Fund, alleges that Hurd breached his fiduciary duty to shareholders by allowing these practices.

The charges are likely to draw attention to HP’s company culture and could affect its chances of winning future contracts, according to reports.

Though Hurd has now left HP, other named defendants in the complaint are include current members of HP’s board of directors.

The papers served allege that the HP board members are as guilty as Hurd of breaching their fiduciary duty by "rewarding Hurd for his conscious decision to allow HP employees to engage in illegal activity".

The resulting fines cost the company and by extension its shareholders, tens of millions of dollars, the plaintiffs claim. But more costly damage has been done to HP’s reputation, they say.

The toll of Hurd’s actions could be catastrophic, claim representatives for the pension fund. It estimates that HP collected over US$880m from government contracts between 2007 and 2009. This government-contracting revenue could now be put in jeopardy by the reputational damage created by the charges brought by the US Justice Department.

The US Department of Justice (DOJ) charged that HP made payments to outside firms to influence the purchase of HP products by federal agencies, in violation of the US Anti-Kickback Act.

Though HP denied any wrongful conduct it agreed to pay the federal government $55m to settle the charges.

The plaintiffs in the shareholder suit filed this week allege that despite having been told that HP’s marketing practices violated federal law in 2007, Hurd and other defendants allowed them to continue until December 2009.

Despite the evidence of Hurd’s participation in kickback schemes the firm rewarded him with a "generous incentive compensation that outpaced H-P’s peers" the shareholder suit alleges. In 2009, Hurd was reported to be the fourth-best compensated corporate executive in the US, according to the shareholders.

The pension fund’s lawsuit demands unspecified damages and the disgorgement of compensation earned by Hurd and other defendants.

Hurd left HP in August following sexual-harassment allegations made by a marketing contractor. In September he was hired by his friend, Oracle CEO Larry Ellison, as Oracle’s new president, where he will oversee the growth of the company’s hardware business.