The Securities and Exchange Commission (SEC) has recommended taking a civil injunction for purported violations of securities law against the former chief financial officer of the Irish company SmartForce.
Mr David Drummond, who now works as general counsel and vice president of corporate development at the internet search engine Google, has received a notice from the SEC informing him of the decision.
The recommendation follows an 18-month investigation by the SEC into certain disclosure and accounting issues relating to SmartForce, which in 2002 merged with US firm SkillSoft.
After its own inquiry into SmartForce's accounting practices last year, SkillSoft said the firm had overstated its profits by up to $127 million (€105 million) over a three-year period up to 2002.
Its investigation found the Irish firm had booked revenue before it should have been recognised on its balance sheet. SmartForce also incorrectly accounted for certain intangible assets and expenses incurred when it acquired nine firms in a period of rapid growth between 1999-2000.
The recommendation by staff at the SEC was communicated to Mr Drummond on July 20th and he has been invited to submit a response to the US agency giving his reasons why the injunction should not be brought.
An SEC spokesman would not comment on the specific case yesterday, but he told The Irish Times that a civil injunction could lead to a range of penalties, such as banning an individual from holding a directorship or levying fines on directors.
The search engine Google, which is preparing for an initial public offering on the Nasdaq, made the disclosure about the recommendation in an amendment to its initial public offering documents filed with the SEC.
"We have the utmost confidence in David's integrity, as well as his abilities as a Google executive. We do not expect that this matter will have any bearing on Google, Google's IPO or David Drummond's performance as vice-president, corporate development and general counsel," it said in a statement.
Google set a price range on Monday of $108 to $135 per share for its initial public offering, which could give the firm a market capitalisation of more than $36 billion.
SkillSoft recently settled a separate class action lawsuit filed by former shareholders in SmartForce in 1998. This lawsuit, which named the former SmartForce directors, Mr Gregory Priest, and the Irish entrepreneur Mr William McCabe, alleged that SmartForce had defrauded investors by making untrue statements of material fact to induce people to purchase its shares. - (Additional reporting Reuters)
