To settle the charges, Google and David C. Drummond, the general counsel, agreed to cease and desist from violating the registration and disclosure requirements again, according to a late afternoon filing Google made with the Federal Trade Commission. No fine was levied.
Under the settlement, Google neither denied nor accepted the SEC's findings. "We are satisfied with the settlement on the stock option issues," said Steve Langdon, a Google spokesman.
Failure to disclose information
According to the SEC, Google's general counsel, David C. Drummond, was aware that the registration and related financial disclosure obligations had been triggered, but believed that Google could rely on an exemption from the law. In fact, the exemption was inapplicable. Mr. Drummond advised Google's board of directors that it continue to issue options, but failed to inform them that under SEC rules it needed to disclose financial information, or that there were risks in relying on the exemption.
"The employees relied entirely upon the company to provide the financial information," said Carlos Vasquez, staff attorney with the SEC's San Francisco district office.
Federal securities laws require companies issuing more than $5 million in options during a 12-month period to either provide detailed financial information to stock recipients, or to register the securities offering with the SEC.
In issuing a cease and desist order, the SEC prohibits the company and the general counsel from committing any future violations, Mr. Vasquez said.
'Not a fraud case'
"We felt this was an appropriate action here because this is not a fraud case and the company cooperated," said Helane Morrison, district administrator at the San Francisco district office.
In a separate matter, the California Department of Corporations said it had settled civil charges against Google for issuing certain stock options to employees in 2003 without registering the offering or disclosing financial information. Google said in its SEC filing that it agreed not to offer or sell securities without fully obeying the law. The search engine did not admit or deny findings.