Google's Top Legal Officer to Pay $700,000 in SEC Fines

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David Drummond, Google Inc.'s chief legal officer, has agreed to pay nearly US$700,000 in fines to the Securities and Exchange Commission for overstating the revenue of SmartForce PLC while he was the e-learning company's chief financial officer.

According to an SEC statement, Drummond was responsible for overstating SmartForce's revenue by $113.6 million and net income by $127 million from 1999 to 2002. SmartForce, in Redwood, Calif., has since merged with Nashua, N.H.-based SkillSoft PLC.

Besides being Google's chief legal officer, Drummond became Google's vice president of corporate development in 2002, according to information on Google's Web site.

"We are pleased that David and the SEC have reached a settlement that brings closure to matters which occurred more than six years ago. David has been an important part of Google's growth and success and we look forward to his continued contributions," said Google CEO Eric Schmidt in a statement e-mailed to Computerworld.

According to the SEC, SmartForce's financial statements didn't comply with generally accepted accounting principles, in part, because they improperly recognized revenue "from various types of transactions in which the company engaged, including multiple-element arrangements, reciprocal transactions and reseller agreements."

In total, the SEC said Drummond and three other SmartForce officers will pay a total of $2.3 million. SmartForce's Dublin-based accountants Ernst & Young Chartered Accountants also agreed to pay $725,000 for "engaging in improper professional conduct in connection with multiple audits and periodic reviews of SmartForce's financial statements," the SEC said.

None of the parties admitted any wrongdoing, the SEC said.

"Recognizing revenue without sound, rigorous analysis is a recipe for false financial statements. Officers must ensure the financials are accurate, and cannot hand off that fundamental responsibility to their subordinates, the auditors or anyone else," said David P. Bergers, director of the SEC's Boston regional office, in a statement.

This story, "Google's Top Legal Officer to Pay $700,000 in SEC Fines" was originally published by Computerworld.

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