Google's chief legal officer slapped with SEC fines

Google Inc.'s chief legal officer was fined by the Securities and Exchange Commission (SEC) Thursday over accounting issues arising from when he was chief financial officer (CFO) at former company.

David C. Drummond, former CFO of software maker SmartForce, was ultimately responsible for financial statements that overstated revenue by US$113.6 million and net income by US$127 million during a three and a half year period ending in mid-2002, the SEC said.

"Drummond's violations arose in part out of his failure to determine whether SmartForce was improperly recognizing revenue (which it was) on a reseller agreement," the SEC said.

Drummond became Google's vice president of corporate development in 2002, in addition to taking on the role of chief legal officer, according to Google's Web site. SmartForce has since merged into SkillSoft PLC.

The SEC fined Drummond and three other former SmartForce executives a total of $2.3 million, while the company's accounting firm, Ernst & Young Chartered Accountants of Ireland, was ordered to pay $725,000 for the transgressions.

The U.S. District Court of New Hampshire also ordered three of the former SmartForce executives to pay civil fines related to the accounting charges, in a case filed by the SEC. Drummond was required to pay the highest fine among the three, $125,000. He and the two other executives neither admitted nor denied allegations in the SEC complaint, according to the statement.

Google was glad to see the matter brought to a close. "David has been an important part of Google's growth and success and we look forward to his continued contributions," the company said in a statement attributed to CEO Eric Schmidt.

A lawyer representing Drummond said in a separate statement that his client had acknowledged that a background in accounting would have helped him in his job at SmartForce, and that during the years in question, SmartForce and other companies were dealing with rapid changes in sales models and accounting rules. SmartForce's outside auditors, Ernst & Young, were also apparently incorrect about how the new rules should be applied, the statement said.