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Google Settles SEC Charges

Times Staff Writer

Google Inc. will not face a penalty from the Securities and Exchange Commission for improperly issuing stock options or for granting an interview to Playboy magazine during the “quiet period” before its initial public offering, company and SEC officials said Thursday.

Google and its general counsel, David Drummond, settled charges that the Mountain View, Calif.-based Internet titan failed to register more than $80 million in stock options it had issued employees and contractors or to give those workers detailed financial statements about the company, as required by law.

Without admitting or denying guilt, Google and Drummond signed a cease-and-desist order, promising not to commit similar offenses in the future. The firm reached a comparable agreement with California regulators.

In a filing with the SEC, Google also said the agency had decided not to “proceed with any enforcement action against Google” regarding the interview, which ran in Playboy shortly before the company held its IPO. Federal law prohibits companies preparing for an IPO from making public statements that could be seen as hyping their stock.

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“We are glad to have these issues behind us,” Google spokesman Steve Langdon said.

The investigations received much publicity during the run-up to Google’s IPO, which in August raised $1.45 billion for the company and an additional $468 million for its executives and early investors. But analysts said most Google shareholders had expected little financial effect, and the company’s stock barely budged Thursday, falling 5 cents to $195.33 on Nasdaq.

“Investors have largely looked past this,” said Mark Mahaney, an analyst with American Technology Research. “At this point it would be considered immaterial.”

SEC officials said in a statement that Google, then a privately held company, withheld the required financial data from workers because company executives feared that secret information would fall into the hands of competitors. Drummond incorrectly decided the company could use an exemption in the law to avoid making those disclosures, the commission said.

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Federal regulators wanted to publicly chastise Google and Drummond to warn other pre-IPO companies considering such tactics, said Marc Fagel, assistant district administrator of the SEC’s San Francisco office.

But he said the agency decided not to fine Google because the violation did not cost investors money, and company executives cooperated with investigators.


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