Google settles with SEC over stock options

January 14, 2005 —

Google Inc. has settled charges with the U.S. Securities and Exchange Commission (SEC) that the search engine company violated the law when it granted stock options to employees without registering those or making required financial disclosures, the SEC said Thursday.

In the two years prior to its initial public offering (IPO), Google granted over US$80 million in stock options to employees but, as mandated by law, it neither provided detailed financial information to the recipients nor did it register the option awards with the SEC, the SEC said in a statement.

The SEC also charged Google's general counsel, David Drummond, with the same offenses, according to the SEC, saying he was aware of Google's obligations related to the stock options, but believed the company could avoid complying by relying on an exemption.

Without admitting nor denying the SEC's findings, Google and Drummond consented to cease and desist from violating or causing violations to Section 5 of the Securities Act of 1933, the SEC said. Google, based in Mountain View, California, also settled similar charges with the California Department of Corporations on Thursday.

Finally, the SEC decided not to pursue any enforcement action against Google related to an interview that the company's founders granted to Playboy magazine prior to the IPO, Google said in a filing with the SEC Thursday. Company executives have to abide by certain rules over what they can say publicly about their companies before an IPO, and it was speculated at the time that the Playboy interview could have put Google in violation of those rules.

"We are pleased there will be no further proceedings regarding the Playboy article and we are satisfied with the settlement on the stock option issues. We are glad to have these issues behind us," said Steve Langdon, a Google spokesman.

IDG News Service