Google has settled with the Securities and Exchange Commission, without incurring fines or other penalties, over charges that the online search kings broke the law by not reporting $82 million in offered employee stock options before its touted initial public offering, and in founders Larry Page and Sergey Brin giving Playboy an interview prior to the IPO.
Google signed an SEC cease-and-desist order without being compelled to either admit or deny wrongdoing in the matter.
Companies who issue over $5 million in options during a twelve-month period to give detailed financial information about the recipients or register the offering with the SEC and publicly disclose financial and other "important information," the SEC said announcing the Google settlement.
"Google far exceeded the $5 million disclosure threshold, yet failed to register the options or provide the required financial information to employees," the SEC continued. "According to the Commission, Google – which, at the time, was still a privately-held company – viewed the disclosure of the information to employees as strategically disadvantageous, fearing the information could leak to Google's competitors."
The SEC also determined that Google general counsel David Drummond knew the registration and related disclosure obligations were triggered but thought Google could duck providing the information to employees by leaning on an exemption, advising Google's board that it could keep issuing the options but not telling the board the registration/disclosure requirement was kicked into play.
"The securities laws exist to ensure full disclosure to investors, including employees accepting stock options as compensation," said SEC director of enforcement Stephen M. Cutler. Companies cannot freely decide that they don't need to comply with the law."
"Attorneys who undertake action on behalf of their company are no less accountable than any other corporate officers," Helane Morrison, district administrator for the SEC's San Francisco office, said in her own statement. "By deciding Google could escape its disclosure requirements, and failing to inform the Board of the legal risks of his determination, Drummond caused the company to run afoul of the federal securities laws."
