Google may have illegally issued employees shares

The company said it sold 23.2 million shares to 1,105 current and former employees and consultants and granted an additional 5.6 million stock options to 301 people. The transactions took place between September 2001 and June 2004 and were not registered, as required by law, Google said. Google, based in Mountain View, California, said it will pay $25.9 million, including interest, to buy back the shares and options.

Some holders of the securities might sue the company rather than accept the buyback, it said. The offer will expire in September, Google said, without specifying a date. Holders who reject or don’t respond to the offer will have their shares automatically registered after the IPO is completed, it said. It was not immediately clear whether the episode would affect the timing of Google’s IPO, which it said it plans to conduct ‘‘as soon as practicable.’’ Google plans in its IPO to offer 24.6 million shares at an estimated $108 to $135 each, valuing the company at as much as $36 billion.

At the high end of the range, the employee share holdings in question would be worth $3.1 billion. The company said it may have broken federal securities laws and the securities laws of 18 states and the District of Columbia by failing to register the stock and options or exempt them from registration. Google is using a ‘‘Dutch auction’’ process for the IPO, and bidders may register at ttp://www.ipo.google.com.

The company and its lead underwriters, Credit Suisse First Boston and Morgan Stanley, will determine the highest price at which there is demand for all shares, and price the shares at or below that price.

Google said the 18 states whose securities laws may have been violated are Arkansas, California, Colorado, Connecticut, Georgia, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Texas, Virginia and Washington.

The New York Times