in

Company and Drummond Agree to Cease and Desist From Violating Regi…

Company and Drummond Agree to Cease and Desist From Violating Registration
and Related Financial Disclosure Requirements

Washington, D.C., Jan. 13, 2005 – LAWFUEL – The Law News Network – The Securities and Exchange Commission today charged Google, Inc. with failing to register the issuance of option grants to employees or provide required financial information to the option recipients. According to the Commission, the Silicon Valley search engine
technology company issued over $80 million in stock options to its employees
in the two years preceding its IPO, yet failed to register the securities or
make financial disclosures mandated by federal securities law. To settle
the charges, Google and its General Counsel, David C. Drummond, agreed to
cease and desist from violating the registration and related financial
disclosure requirements.

The Commission found that between 2002 and 2004, Google issued over $80
million worth of stock options to its employees as part of their
compensation. The federal securities laws require companies issuing over $5
million in options during a 12-month period either to provide detailed
financial information to the option recipients, or to register the
securities offering with the Commission and thereby publicly disclose
financial and other important information. According to the Commission,
Google far exceeded the $5 million disclosure threshold, yet failed to
register the options or provide the required financial information to
employees. 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 Commission’s order further finds that Google’s General Counsel David
Drummond, 41, of San Jose, Calif., was aware that the registration and
related financial disclosure obligations had been triggered, but believed
that Google could avoid providing the information to its employees by
relying on an exemption from the law. According to the Commission, Drummond
advised Google’s Board that it could continue to issue options, but failed
to inform the Board that the registration and disclosure obligations had
been triggered or that there were risks in relying on the exemption, which
was in fact inapplicable.

Stephen M. Cutler, Director of the Commission’s Enforcement Division in
Washington, D.C., said, “The securities laws exist to ensure full disclosure
to investors, including employees accepting stock options as compensation.
Companies cannot freely decide that they don’t need to comply with the law.”

Added Helane Morrison, District Administrator of the Commission’s San
Francisco District Office, “Attorneys who undertake action on behalf of
their company are no less accountable than any other corporate officers. 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.”

The Commission’s Order charges Google with violating Section 5 of the
Securities Act of 1933, which imposes registration and disclosure
obligations in the offer or sale of securities, and further charges Drummond
with causing Google’s violation. Without admitting or denying the
Commission’s findings, Google and Drummond consented to an order that they
cease and desist from violating or causing violations of Section 5.

In a related matter, the California Department of Corporations announced
that it had settled civil charges against Google for issuing certain stock
options to Google’s employees and consultants during 2003 without
registering the offering and without providing financial information
required to be disclosed under state securities laws in violation of Section
25110 of the California Corporations Code.

# # #

For more information, contact:

Helane Morrison

District Administrator

(415) 705-2450

Marc Fagel

Assistant District Administrator

(415) 705-2449

British MP George Galloway and his opponent the Daily Telegraph will leave no stone unturned to sort out what could be a spectacular libel case.