Criminal charges are "likely" in the scandal surrounding spying by the board of Hewlett Packard of its directors, and of reporters covering the company, according to California's Attorney General Bill Lockyer.

HP board chairman Patricia Dunn has said she will not resign over the scandal but said she was "appalled" that contractors hired to investigate news leaks had used potentially illegal methods.

The board of director held a special meeting on Sunday to discuss the situation but despite several hours of discussions, nothing was resolved and the meeting will continue on today.

HP is on the defensive after disclosures last week that phone records of HP board members and journalists were hacked to see who on the board discussed confidential strategy sessions with reporters. The company disclosed in a US Securities and Exchange Commission that investigators, in order to identify the leaker, had used "pretexting," a method in which false pretenses are used to gain online access to others' phone records.

The investigation determined that director George Keyworth was the source for a CNet story in January about HP's strategy. Keyworth was asked to resign from the board in May but refused. Board member Thomas Perkins resigned instead over the board's handling of the investigation.

Dunn said that while she ordered the investigation of board leaks, she did not know the investigators hired to conduct the probe used pretexting. "I was appalled. And I'm going to apologise," to those journalists, she told the Wall Street Journal.

The investigations covered the personal phone records of three reporters for CNet - Dawn Kawamoto, Tom Krazit and Stephen Shankland - as well six other reporters, including Pui-Wing Tam and George Anders of The Wall Street Journal; John Markoff of The New York Times; and Peter Burrows, Ben Elgin and Roger Crockett from BusinessWeek.

Dunn argued that because she was also subject to investigation, she said she could not have known what methods the investigators used. But while she does not plan to resign, Dunn said she will take into consideration what the board thinks she should do. "I serve entirely at the pleasure of the board. If they determine it no longer is in the interest of shareholders [for me to remain on the board] I will do so.''

Charges could be filed under a California law prohibiting gaining unauthorised access to computer data or under another law prohibiting identity theft through unauthorised use of personal information. The investigation is ongoing but prosecution is likely because a crime has occurred, California's Attorney General Bill Lockyer told the San Jose Mercury News.

A bill to specifically outlaw pretexting is on governor Arnold Schwarzenegger's desk awaiting his signature. The governor has until the end of September to sign or veto the bill. Schwarzenegger hasn't taken a position on the pretexting bill, but only because it is one of hundreds of bills passed during the recently concluded session of the California Legislature, a spokesman said.