The line between unethical and illegal may not exist.

THE five most dangerous words in the United States today just might be: "It is unethical, but legal."

Those making such a statement to rationalize that it's OK to do something unethical so long as it's "legal" forgot that there is an intimate connection between ethics and law in the United States. They mistook a lack of enforcement of unethical conduct to mean that the unethical conduct was "legal," which often isn't true at all.

American courts can and do look at the spirit of the law, not just the letter of the law. And of course, with our free press, the first "court" an unethical person or organization has to worry about is the court of public opinion.

What is happening currently to senior company officials, employees and contractors at Hewlett Packard is yet another cautionary tale about the high price of believing that American law and public opinion will permit unethical (that is, wrong) behavior for long.

This wrong-headed mantra, "it is unethical, but legal," was popularized during the heady go-go days of the 1990s sizzling stock market. In a fast-rising stock market where everyone felt like an investing genius for choosing stocks that miraculously kept going up and up, few voiced complaints about unethical behavior. To be sure, there were a few faint cries of concern over the lack of ethics in business during the 1990s, but those voices were drowned out by the rah-rah crowd eager to continue making their paper profits in a constantly rising stock market.

All that changed in 2000 with the bursting of the stock market bubble. What was discovered, and this should come as no surprise, is that unethical (that is, wrong) behavior in business can, and often does, lead to some pretty nasty consequences. When that happens, the enforcement arm of American law, dormant during good economic times, can surface with a vengeance.

Enron and Worldcom dissolved into multibillion dollar bankruptcies. Thousands of employees lost their jobs and life savings and billions of dollars of investor wealth vaporized almost overnight. Some of the celebrity chief executives, dripping with executive privilege, perks and shareholder wealth, became the new poster children for "America's Most Wanted."

Several chief executives ended up with long prison sentences, the longest so far being 25 years in prison for Bernie Ebbers, WorldCom's former chief. WorldCom had the dubious distinction of filing the largest bankruptcy in American history after an $11 billion accounting "mistake" was uncovered.

Based on lies

What the 24/7 media coverage and subsequent trials of companies like WorldCom and Enron revealed was that much of the stock wealth generated during the 1990s at some of our high-flying companies was based on lies about the true financial condition of the companies.

Those lies were wrong, that is unethical, throughout the 1990s and they were never "legal." When legal enforcement of the unethical conduct came in the early 2000s, the legal issue involved was not whether or not all of the accounting rules were accurately followed (which led some to say that what WorldCom did was "legal"). The legal issue raised was whether or not there was fraud--which is very broadly defined as deceit about something important on which someone else actually and reasonably relies to his or her detriment.

The Hewlett Packard ethics mess also involves lying (which is what the fancy word "pretexting" means), but in a different context.

In order to stem alleged board leaks of confidential company information to the media, Patricia Dunn, as chairwoman, instigated an investigation to find out Which director or directors were doing the leaking. The actual investigation allegedly was being supervised by HP's chief ethics officer, Kevin Hunsaker, who was an attorney reporting directly to HP's general counsel, Ann Baskins.

To obtain the personal phone records of its directors and outside journalists, HP investigators pretended that they were asking for their own phone records. That is, they lied about their identities to get copies of other people's phone records, which most Americans would probably view to be confidential private information. Therefore, what the HP investigators did was unethical. That is, wrong.

The question of whether it was "legal" will be fought out in court, but already the fallout for the company and for those company officials, employees and independent contractors involved has been swift, severe and painful. Dunn and another director, the general counsel, who had worked at HP for 24 years, the chief ethics officer and two other HP executives have all lost their jobs.

Several top HP executives, employees and contractors were "publicly flogged" at Congressional hearings. Five people, including Dunn and Hunsaker, and three of the private investigators have been indicted.

Hewlett Packard's once squeaky-clean ethics reputation has been seriously tarnished by the constant drumbeat of negative media attention.

Perhaps the time has come for us to drop the "it is unethical, but legal" phrase from today's conversation and replace it with another short statement that more accurately describes today's attitude towards unethical conduct. It would go something like this:

"If it's unethical, it's probably illegal, or about to be, and even if it's not, it's still likely to be both painful and expensive."

Linnea McCord is associate professor of business law at the Graziadio School of Business and Management at Pepperdine University. She is an occasional contributor to the Business Journal's Commentary section.