Disclosure Insight® reports provide commentary and analysis on public company interactions with investors and with the SEC. They are heavily reliant on our expertise in using the Freedom of Information Act.
Documents point to at least five undisclosed SEC investigations of Google since 2011.
Summary and Opinion: In Feb-2016, the SEC issued a formal order of investigation “In the Matter of Google, Inc.”, which went into areas investors and advertisers would almost certainly consider material.
The investigation, which looked back as far as 2010, examined potential fraud involving click measurement and/or invalid traffic on Google’s advertising network. Though formal, and appearing to last nearly two years (we don’t know exactly when it started), the investigation was never disclosed. It ended in Nov-2017 without an enforcement action taken.
Documents in our archive show that Alphabet/Google, no stranger to SEC investigations, is also something of a shy bunny when it comes to disclosing them to investors. We have documents on five of them now, dating back to 2011. The fact we now have some meaningful – and analytically troubling – color on the most recent undisclosed SEC investigation we know about, one cannot wonder if Alphabet / Google will ever disclose an SEC investigation? The record of not disclosing such things suggests that if the company ever does disclose an SEC probe, it should absolutely be taken as a serious risk.
The following is from the Feb-2016 formal order from the SEC investigation of Google –
For those inclined to point out that Google’s SEC investigation(s) ended without an enforcement action, we point out that is the case with the majority of them. Fraud is hard to prove and the government has to pick its fights carefully. Having said that, even without an enforcement action, SEC investigations can bring about changes that can hurt company performance long after the investigation ends. That’s why it’s so important to go back later and follow-up on what you can find out after the fact.
We have documents in our library on five closed SEC probes of Google. None were disclosed. This includes the following –
- In 2018, 32 pages of documents were released from the 2016-17 SEC investigation of Google summarized above. The SEC withheld in full access to a six-page Case Closing Recommendation from this investigation. Per the SEC, Google made 15 requests for confidential treatment of documents related to this investigation, “covering a date range from March 2016 through September 2017 with an estimated page count of 4,325.”
- In 2016, the SEC released a Case Closing Report titled “Public Company Segment Reporting Practices”. This matter ended 14-Oct-2016.
- In 2015, we obtained Case Closing Reports on two separate investigations of Google. The first was dated 01-Apr-2014, the second was dated 08-Oct-2014. No other records or information was provided on these two probes. However, when these records were released, the SEC also denied our access to other records as they pertained to ongoing enforcement activities at the time.
- In 2013, we obtained an SEC letter sent to Google in Oct-2011 informing the company an SEC inquiry was ending without an enforcement action. We also have a related Case Closing Report dated Jan-2012. We were denied access to 22 pages of records on this probe.
Unfortunately, aside from knowing with certainty when some of Google/Alphabet’s undisclosed SEC probes from recent years ended, for nearly all of the investigations we found, the documents released by the SEC tell us virtually nothing about what the SEC was investigating at the time.
As of Apr-2018, an SEC response indicated no recent investigative activity was found at Alphabet/Google. We will refresh this research in the spring of 2019.
Editor’s Note: When the SEC denies access to records on closed SEC investigations, they are frequently blocking internal SEC documents known as “Opening and Closing Reports, including ‘Case Closing Recommendation,’ ‘Matter Under Inquiry Summary,’ ‘Investigation Summary,’ and/or similar documents and/or reports.” A Case Closing Report is merely the cover page for a report called a Case Closing Recommendation. A Case Closing Recommendation is the SEC’s report that tells you why an investigation was opened, what work was done, and the conclusions reached. To date, the SEC is adamant in its refusal to release even one word from its Case Closing Recommendations and similar documents, a practice for which we remain sharply critical of the agency.
– Probes Reporter®
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Notes: New SEC investigative activity could theoretically begin or end after the date covered by this latest information which would not be reflected here. Our Disclosure Insight® reports, like those coming from other financial news and data providers, provide the investing public with commentary and analysis on public company interactions between investors and/or with the SEC and other agencies. They are journalistically based in large part on our expertise with federal filings using the Freedom of Information Act.