Google Docs is a fantastic tool that makes collaboration easy, but only when document security is not a pressing concern. Google itself acknowledges this, when Google Enterprise President Dave Girouard recently endorsed the use of Google Docs as a supplement to MS Office, to facilitate collaboration.
Section 11.1 of Google’s Terms of Service states "...you give Google a perpetual, irrevocable, worldwide, royalty-free, and non-exclusive license to reproduce, adapt, modify, translate, publish, publicly perform, publicly display and distribute any Content which you submit, post or display on or through, the Services." The license is perpetual for all content, and does not even if the user marks a document private, deletes the content, or closes the account. Although Google states it respects users' privacy, and lives up to its promise, it remains within its legal rights not to do so.
A secure VPN, FTP with SSL, or FTP over SSH (secure shell) rank as more secure options to store and share sensitive documents over the Internet.