Update on this issue:
The above appears to be due to a Powershell security issue when installing HDP on standalone (non-domain member) Windows servers. There may be a step or two missing in the installation instructions in section 5.5. I added each machine to a domain, set Group Policy for the domain (as directed by section 5.6 and the above issue disappeared. Also, I installed version 1.3 and replicated the behavior.