Let me try to white-board this transaction for you.  Executive at BigCo has a girlfriend with a start-up company.  Executive makes loan to Start-Up in the amount of $2.6 million.  Then, Start-Up seeks outside investors for Series A financing.  BigCo invests $3.9 million in the financing round, and Start-Up repays Executive's $2.6 million loan.  Executive and girlfriend marry the same month.  The total amount of the Series A financing is undisclosed, but we know that a company controlled by another BigCo director is an investor.

Does this sound like another Andy Fastow transaction, maybe Project Princess Leia?  It's obviously not as brazen or large-scale.  Is it another example of Jeff Skilling investing $180,000 of his own money in his girlfriend's company, Photofete, while the company was a vendor to Enron -- a transaction jurors later said was particularly damning to Skilling's character?

Nope.  This is our beloved Google, and the tale of Sergey Brin and his new wife, Anne Wojcicki.  Wojcicki's start-up is called 23andMe.  NYT article here.  The company's sparse website gives very little information about what the company will actually do, but it does say they are hiring and one fringe benefit is complimentary beverages and honey roasted peanuts.  The website's one paragraph on its business plan states that the company will help clients take ownership of their genetic information and seems to promise to help clients map their own genomes.  The website lists three people in the "about us" section:  Wojcicki, another co-founder and a director.  All three have experience in health care industry sales, analysis and investing.

Google does invest in start-ups.  (Google was very public about its goal to invest in market-based socially responsible projects, but this doesn't seem to fall into that category.)  The outside investment part is not unusual.  But why this start-up?  Obviously, Brin picked a great start-up once, and maybe 23andMe is the next Google.  Could be.  But doesn't it raise more concerns than necessary?  Brin has his own $14 billion to invest in projects.  Why not just invest personally?  If he believes in the upside of Wojcicki's company so much, why isn't he on the equity side instead of the debt side that just got repaid?  Does having Google as an angel investor give 23andM3 some cachet?  Even though it's public knowledge that the head of one is married to the head of the other?  In today's culture of seeing scandal where none exists, this corporate investment seems to be unnecessary. 

Here is Google's Code of Conduct, which includes a section on "Conflicts of Interest."  Although the section begins with this "avoid conflicts" language

A conflict of interest occurs when, because of your role at Google, you are in a position to influence a decision or situation that may result in personal gain for you or your friends or family at the expense of the company or our users. All of us at Google should avoid situations that present actual or apparent conflicts of interest; it is our responsibility to act at all times with the best interests of Google and our users in mind. In no way should you personally profit from transactions based on your relationship with Google if it harms the company.

this admonition seems to be clearly waivable by a superior:

Similarly, business relationships with friends and relatives whose interests may conflict with Google's can easily leave you with the sort of conflict of interest that can be difficult to resolve happily. Our rule here is simple: you should not enter into a Google-related business relationship with a close relative, friend or significant other, or a business they manage or control, without first contacting our Chief Compliance Officer or General Counsel.

Obviously, the code is written for management employees who have the ability to steer work to vendors, etc. not for top management who have the ability to steer Google capital to outside investment opportunities -- or to repay loans to oneself with Google capital.  According to Google's 8K, probably required under SOX because of the waiver of the Code of Ethics for a senior officer, the transaction was approved by the directors after the Audit Committee received an evaluation of 23andMe.  So the transaction was duly approved and duly disclosed.  Let's hope that's enough these days.

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