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Google 'close to $500m settlement' over illegal drug ads

By jon-q, May 14, 2011 | Updated: Aug 24, 2011 | | |
  1. jon-q
    Google 'close to $500m settlement' over illegal drug ads
    Payment would be among largest penalties in US history

    Google has set aside $500 million not for an antitrust settlement, but to settle a US criminal investigation into claims that it made hundreds of millions of dollars from ads purchased by illegal online pharmacies, according to a report citing people familiar with the matter.

    Earlier this week, in an SEC filing, Google said it had set aside $500m for a potential settlement with the US Department of Justice involving the use of Google advertising by "certain advertisers", but the company not provide additional information. Google co-founder Sergey Brin was asked about the filing this week at Google's annual developer conference, but he declined to answer.

    It was assumed that the filing with related to possible antitrust investigations into the company's practices, but according to The Wall Street Journal, Google is close to settling with the DoJ over allegations that it knowingly accepted ads from online pharmacies that were violating US law.
    Google did not immediately respond to a request for comment.

    A $500m payment would be among the largest penalties paid by a company to the US government, according to The Journal. In 2007, Google, Microsoft, and Yahoo! paid a combined $31.5m to settle allegations they profited from illegal gambling sites.

    According to The Journal, the potential $500m settlement involves ads for pharmacies in Canada and other countries. In 2004, the paper points out, Google announced that it would continue accepting ads from Canadian pharmacies, sparking criticism from some US pharmacies and regulators. The current investigation was been carried out by the US Attorney's Office in Rhode Island and the Food and Drug Administration (FDA) as well as other agencies, The Journal said.

    In February 2010, Google announced that it would only allow ads from US pharmacies approved by the National Association of Boards of Pharmacy and from Canadian online pharmacies approved the Canadian International Pharmacy Association.

    The Journal report is just another indication that Google's ad system can be friendly to bad actors, and it raises more questions about how far Google goes to prevent such exploitation. Harvard professor Ben Edelman estimates, for example, that the company makes nearly $500m a year from "typosquatters". In a 2010 study, he estimated that at least 938,000 domains were typosquatting on the top 3,264 ".com" websites, waiting for web users to mistype or misspell a URL, and that 57 per cent of these "mispelled" domains included Google pay-per-click ads. Typosquatting can violate US trademark law. Google says it will remove typosquatting domains if it is made aware of them.

    Ads from illegal online pharmacies are more serious issue. As The Journal points out, Google has taken action before against such sites. In 2003, for instance, the company said it had banned ads from US operations that offer Vicodin, Viagra, and other drugs without a prescription. ®

    By Cade Metz in San Francisco
    Posted in Law, 13th May 2011 16:30 GMT



  1. benzup!
    its good to see that google at least try to 'do no evil' by helping honest citizens find their pharmaceutical needs quickly and easily. In my eyes, its their way of saying 'screw you bullshit laws, we're going to do our best to get round you and help others do the same'.
  2. enquirewithin
    None of the big IT companies have any respect for the law. Microsoft is the worst, with cases against it in the EU and US (the latter bought off by funding the GOP). In this case, however, there doesn't seem much evil done. Big Pharma makes billions and kills many, destroys the lives of many, with its greedy search for profitable drugs. That is the real issue -- not the protection of citizens- but the protection of corporate profits.
  3. jon-q
    Google pays $500 million to settle DOJ case over illegal drug ads

    NEW YORK -- Google has agreed to a $500 million settlement with the U.S. Department of Justice for illegally allowing online Canadian pharmacies to advertise drugs to U.S. consumers.

    The settlement, which represents the revenue received by Google for selling the ads through its AdWords program and the estimated revenue the Canadian pharmacies got from their sales to U.S. consumers, was one of the largest ever in the United States, according to the DOJ.

    "This investigation is about the patently unsafe, unlawful importation of prescription drugs by Canadian online pharmacies, with Google's knowledge and assistance, into the United States, directly to U.S. consumers," said U.S. Attorney Peter Neronha.

    Neronha said he hopes the settlement "gets the attention" of other potential violators as well, and he believes the settlement will limit the ability of "rogue online pharmacies" to sell drugs in the United States.

    The Justice Department said Google was aware as early as 2003 that Canadian pharmacies were illegally shipping prescription drugs into the United States. Google took steps to block pharmacies in countries other than Canada from advertising in the United States, but continued to allow Canadian pharmacy ads to target U.S. consumers.

    Google eventually stopped the practice in 2009, once the company became aware of the U.S. Attorney's Office's investigation

    "We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago," a Google spokesman said in a prepared statement. "However, it's obvious with hindsight that we shouldn't have allowed these ads on Google in the first place."

    The news of the pending settlement was first unveiled in a regulatory filing in May, catching many by surprise.

    Google set aside the $500 million in the first quarter, revising its profit down for that period, which ended March 31, 2011. It said it earned $1.8 billion, or $5.51 per share, down from the $2.3 billion, or $7.04 per share, that it initially reported in April.

    The search giant is no stranger to investigations by regulators from around the world.

    The Federal Trade Commission formally notified Google in June that it is investigating the company. The company faces similar scrutiny in an ongoing antitrust investigation by the European Commission.

    Also, the Department of Justice heavily scrutinized the company's purchase of flight data software company ITA, and the DOJ is currently studying

    Google's proposed $400 million purchase of digital advertising toolmaker Admeld.

    Next up, regulators will analyze the company's proposed acquisition of Motorola Mobility.

    The DOJ's probe of Google's AdWords sales had its origins in an entirely separate investigation.

    The agency said it was initially looking into a financial fraud case, the main target of which fled Mexico. While a fugitive, he began to use Google's
    AdWords to advertise the illegal drug sales. After being apprehended in Mexico and returned to the United States, he began cooperating with law enforcement agents and provided information about his use of Google ads.

    That prompted investigators to set up a sting, creating undercover websites for the purpose of advertising illegal prescription drug sales through AdWords.

    David Goldman
    CNN Money 24th Aug 2011
  4. jon-q
    Regulators Say Google Knew About Illegal Drug Ads

    Federal investigators say Google co-founder Larry Page knew ads for unlicensed online pharmacies were illegal but allowed them anyway, suggesting the government may continue to carefully monitor Google’s advertisements.

    Google late last week agreed on a $500 million settlement in a U.S. Justice Department criminal probe about Canadian pharmacies’ advertising through Google-owned AdSense.

    A federal prosecutor today said government investigators sorted through more than four million documents and found numerous emails that they say show Page was aware of the ad sales but didn’t stop them. Officials won’t release the documents because Google settled the case and a trial was not held.

    “We simply know it from the documents we reviewed, witnesses that we interviewed, that Larry Page knew what was going on,” said U.S. Attorney Peter Neronha, who led the investigation, to The Wall Street Journal.

    The Canadian pharmacies, which advertised on AdSense for years, had been selling prescription drugs without a doctor’s order to customers in the U.S., which violates federal law. It is also against the law for websites to knowingly accept ads for companies or services that are illegal.

    The Justice Department says Google knew it was potentially violating U.S. law since at least 2003, but didn’t take action until federal investigations began in 2009. Although Google told Congress it tried to stop illegal advertisements, Neronha said those efforts amounted to “window dressing.”

    “Suffice it to say that this is not two or three rogue employees at the customer service level doing this on their own,” Neronha told the Wall Street Journal. “This was a corporate decision to engage in this conduct.”

    Google over the weekend declined to comment on Page’s alleged knowledge about the ad sales.

    “This issue is not related to current advertising practices,” a company spokesman said. “We have settled and we are moving on…it’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place.”

    Even though Google admitted wrongdoing in the case, the settlement didn’t single out Page or any other executives. Neronha said he doesn’t have plans to prosecute Page, but also said the Google CEO, or other executives, are not off limits where prosecutions are concerned.

    Google has a lot more to lose if the government finds any more problems with its advertising sales. Google’s AdSense program dominates mobile advertising, with Millenial Media reporting Google accounts for nearly half of all mobile advertising, a number that will likely continue to grow as more people use smartphones and tablets.

    But last week’s settlement may just be the beginning of Google’s legal woes over its advertising practices, as Google is still involved in another, wider federal probe concerning antitrust practices, initiated by the Justice Department after rivals complained Google allegedly skewed search results to favor its advertisers.

    Because the search giant and the government haven’t settled that investigation, Google may face millions more in settlement costs if the Justice Department finds it guilty of antitrust violations.

    While Google agreed to settle the government investigation over the drug advertisements, Neronha’s statements about Page’s knowledge of improprieties concerning the sales may indicate the government probe into Google may not end for some time.

    Forbes 29th Aug 2011
  5. enquirewithin
    This is what Google, Microsoft, and Apple do-- deliberately break the law and simply pay out fines as their profits are so huge anyway. Is that the American dream?
  6. Terrapinzflyer
    Report: Top Google Execs Approved Illegal Drug Ads

    The federal government enlisted the help of a convicted con artist to set up phony Web sites selling illegal narcotics which advertised on Google, according to a report.

    Moreover, senior Google executives, including co-founder Larry Page, knew about and approved the ads, according to the report.

    The behind-the-scenes look at the sting, by the Wall Street Journal, never was publicly revealed, because Google settled with the Department of Justice for $500 million to prevent the information from coming to light, the Journal said. Shareholders subsequently sued, and Google was also called upon to remove similar ads in the United Kingdom.

    David Whitaker, who took orders of Apple electronics and other devices below cost, then fled to Mexico to open an online business selling steroids and human growth hormone to U.S. consumers, agreed to help federal agents. In effect, he transferred the business to the United States federal government, who then used a federal credit card to pay Google's ad fees, the Journal reported. Whitaker worked out of a facility in Rhode Island wearing leg irons.

    Interestingly, Google's statement accompanying the settlement blamed AdWords sales by Canadian pharmacies, who allegedly were selling drugs to U.S. consumers. "We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago," Google said then. "However, it's obvious with hindsight that we shouldn't have allowed these ads on Google in the first place."

    The ads that Whitaker and the U.S. government created even included the statement "no prescription needed," which clearly violated U.S. laws. However, Google sales executives and agents personally approved the ads, the Journal claimed.

    Google, for its part, said in a statement that the company bans "not just ads but also advertisers who abuse our platform, and we work closely with law enforcement and other government authorities to take action against bad actors," it told the Journal.

    However, Peter Neronha, the U.S. attorney for Rhode Island who led the multiagency federal task force that conducted the sting, also claimed that chief executive Larry Page had personal knowledge of the operation, as did Sheryl Sandberg, a Google executive who now is the chief operating officer for Facebook. Page and Sandberg declined to comment to the Journal.

    Selling illegal narcotics is a felony, and Whitaker could have been sentence up to 65 years for his crimes. But thanks to his cooperation, he received a six-year sentence.

    By Mark Hachman
    January 25, 2012

  7. Terrapinzflyer
    Con Artist Starred in Sting That Cost Google Millions

    PROVIDENCE, R.I.—Wearing leg irons and guarded by federal agents, David Whitaker posed as an agent for online drug dealers in dozens of recorded phone calls and email exchanges with Google sales executives, spending $200,000 in government money for ads selling narcotics, steroids and other controlled substances.

    Over four months in 2009, Mr. Whitaker, a federal prisoner and convicted con artist, was the lead actor in a government sting targeting Google Inc. that yielded one of the largest business forfeitures in U.S. history.

    "There was a part of me that felt bad," Mr. Whitaker wrote in his account of the undercover operation viewed by The Wall Street Journal. "I had grown to like these people." But, he said, "I took ease in knowing they…knew it was wrong."

    The government built its criminal case against Google using money, aliases and fake companies—tactics often used against drug cartels and other crime syndicates, according to interviews and court documents. Google agreed to pay a $500 million forfeiture last summer in a settlement to avoid prosecution for aiding illegal online pharmaceutical sales.

    Google acknowledged in the settlement that it had improperly and knowingly assisted online pharmacy advertisers allegedly based in Canada to run advertisements for illicit pharmacy sales targeting U.S. customers.

    "We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago," the company said in its sole comment on the matter. "However, it's obvious with hindsight that we shouldn't have allowed these ads on Google in the first place."

    The half-billion dollar forfeiture, although historically large, was small change for Google, which holds $45 billion in cash. But the company's acceptance of responsibility opened the door to potential liability for taking ads from other people involved in unlawful acts online, such as distributing pirate movies or perpetrating online fraud.

    Google has long argued it wasn't responsible for the actions of its more than one million advertisers. But the forfeiture paid by Google represented not just the money it made from the ads, but also the revenue collected by illegal pharmacies through Google-related sales.

    In an important shift, the settlement "signals that, where evidence can be developed that a search engine knowingly and actively assisted advertisers to promote improper conduct, the search engine can be held accountable as an accomplice," according to Peter Neronha, the lead prosecutor.

    Unknown is whether the company will toss aside advertisers as a result. "If Google were to adopt a much more restrictive definition of problematic advertisements, everyone would immediately notice a drop in their revenue," said Eric Goldman, director of the High Tech Law Institute at Santa Clara University.

    The government's case also contained potentially embarrassing allegations that top Google executives, including co-founder Larry Page, were told about legal problems with the drug ads.

    Mr. Page, now Google's chief executive, knew about the illicit conduct, said Mr. Neronha, the U.S. attorney for Rhode Island who led the multiagency federal task force that conducted the sting. "We simply know from the documents we reviewed and witnesses we interviewed that Larry Page knew what was going on," he said in an interview after the August settlement.

    Mr. Neronha declined to detail the evidence, which was presented in secret to a federal grand jury. Other people familiar with the case said internal emails showed Sheryl Sandberg, a former top Google executive who left in 2008 for Facebook Inc., had raised concerns about the ads.

    Prosecutors could have used that evidence to argue Google deliberately turned a blind eye to lawbreaking to protect a profit stream estimated by the government in the hundreds of millions of dollars.

    Ms. Sandberg declined to comment through a spokesman. Mr. Page also declined to comment.

    Google says it has strict policies in place to prevent criminals from using its ad services and it bans advertisers who repeatedly violate its guidelines.

    "We ban not just ads but also advertisers who abuse our platform, and we work closely with law enforcement and other government authorities to take action against bad actors," said Kent Walker, Google's general counsel.

    Mr. Whitaker's story, told here for the first time, presents a different picture. Shuffling into federal court in handcuffs and beige overalls last month, the 37-year-old prisoner looked like he could pass for an employee of a Silicon Valley start-up.

    The Tennessee native suffers from bipolar disorder, according to court submissions by his lawyers, and has a history of manic spending and fraud sprees. When he was 16 years old, Mr. Whitaker took his mother's credit card, rented a private jet and flew his girlfriend for a shopping spree in Knoxville, the documents said.

    Mr. Whitaker's path to undercover operative began in 2005, when he took millions of dollars in orders for Apple iPods and other electronics at below market prices and skipped town without filling the orders, according to his account and court documents. He hopscotched around the U.S. in a private jet, evading arrest and protected by a private security detail. He briefly rented a Miami mansion for $200,000 a month.

    He fled to Mexico in 2006 and started an Internet pharmacy, selling steroids and human growth hormone to U.S. consumers through Google ads, he said. The two substances—sold in the U.S. by prescription only—are sought by body builders to add muscle and by older consumers seeking to slow the signs of aging; they aren't approved in the U.S. for such uses. Google's policy prohibited advertising their sale online.

    "It was very obvious to Google that my website was not a licensed pharmacy," Mr. Whitaker wrote to the Journal. "Understanding this, Google provided me with a very generous credit line and allowed me to set my target advertising directly to American consumers."

    Mr. Whitaker was arrested in Mexico in March 2008 for entering that country illegally and returned to the U.S. to face charges of wire fraud, conspiracy and commercial bribery in the iPod case. Mr. Whitaker told U.S. authorities about the alleged role Google played in helping his Mexico-based pharmacy.

    Federal prosecutors, seeking to test the allegation, set up a task force in early 2009 with Mr. Whitaker's help. On weekdays, he was escorted from the Wyatt Detention Facility in Central Falls, R.I., to a former school department building in North Providence, R.I. There, under the watch of federal agents, he set a snare for Google.

    Posing as the fictitious Jason Corriente, an agent for advertisers with lots of money to spend, Mr. Whitaker bypassed Google's automated advertising system to reach flesh-and-blood ad executives. Federal agents created www.SportsDrugs.net, designed to look "as if a Mexican drug lord had built a website to sell HGH and steroids," Mr. Whitaker said in his account of the sting.

    Google first rejected it, along with an anti-aging website called www.NotGrowingOldEasy.com. But the company's ad executives worked with Mr. Whitaker to find a way around Google rules, according to prosecutors and Mr. Whitaker's account.

    The undercover team removed a link to buy the drugs directly—instead requiring customers to submit an online request form—and Google approved it. "The site generated a flood of email traffic from customers wanting to buy HGH and steroids," Mr. Whitaker said.

    To pay Google's fees for the growing online traffic, undercover agents made payments every two or three days with a government-backed credit card.

    Federal agents grew more brazen. They created a site selling weight-loss medications without a prescription, according to Mr. Whitaker and people familiar with the matter. They also added another site selling the abortion pill RU-486, which in the U.S. can only be taken in a doctor's office.

    Google's ad team in Mexico approved the site, so U.S. consumers searching for "RU 486" would see an ad for the site. Google ad executives allowed the agents to add the phrase "no prescription needed."

    Days later, federal agents added links to buy the drugs directly. Such sales broke U.S. laws prohibiting the sale of drugs from outside the country and without a prescription. "There were photos of the drugs, descriptions, labels that clearly printed out that we were shipping without a prescription and it was from Mexico," Mr. Whitaker said.

    By the end of the operation in mid-2009, agents were buying Google ads for sites purportedly selling such prescription-only narcotics as oxycodone and hydrocodone. Agents also got Google's sales office in China to approve a site selling Prozac and Valium to U.S. customers without a prescription.

    "Google's employees were instrumental in bypassing policy regarding pharmacy verification," Mr. Whitaker told the Journal. "The websites were blatantly illegal."

    At the agents' direction, Mr. Whitaker said he signaled his illegal intent to Google ad executives, including Google's top manager in Mexico. As a tape recorder ran, he walked Google executives through the illegal parts of the websites. He said he told ad executives that U.S. Customs had seized shipments, for example, and that one client wanted to be "the biggest steroid dealer in the United States."

    Agents at first ignored the flood of orders. But as the ersatz sites morphed into full-fledged Internet pharmacies, they worried that clients, some sick, would be expecting medication.

    So customers were told they had to become members by filling out an online form and to receive a "membership kit." The kits never arrived, but it stopped users from placing orders, Mr. Whitaker said.

    In the summer of 2009, U.S. agents visited Google's headquarters in Mountain View, Calif., to tell corporate executives about the evidence they had collected. Prosecutors served grand jury subpoenas and eventually collected four million pages of internal emails and documents, as well as witness testimony.

    The federal task force, which also included the Food and Drug Administration's Office of Criminal Investigation, was preparing criminal charges against the company and its executives for aiding and abetting criminal activity online, prosecutors said.

    Google hired attorney Jamie Gorelick, the former deputy U.S. Attorney General under President Bill Clinton. Two years later, the company reached a settlement with the government, a decision that stopped the likely introduction of emails to top Google executives had the case gone to trial.

    "Suffice to say this was not two or three rogue employees at the customer service level doing this on their own," said Mr. Neronha, the U.S. attorney. "This was corporate decision to engage in this conduct."

    Six private shareholder lawsuits have so far been filed against Google's executives and board members, alleging they damaged the company by not taking earlier action against the illegal pharmacy ads.

    Google has other potential legal exposure. Record companies and movie studios say Google willfully profits from illegal Internet piracy—an issue raised last week, when Congress dropped antipiracy legislation after opposition from Internet companies, including Google.

    A 2011 study commissioned by NBC Universal estimated that nearly a quarter of all Internet traffic relates to pirated movies, TV shows and games. "There's big business in being agnostic about what sites you place your ads on," said Jay Roth, national executive director of Directors Guild of America, which backed antipiracy legislation.

    Online scams pose another potential legal threat. Searches relating to mortgage refinancing have been among the most popular on Google, Eric Schmidt said in 2009 when he was chief executive. An investigation by Consumer Watchdog, a consumer advocacy group, found that a large number of companies selling "mortgage modification" on Google bore the hallmarks of fraud.

    The special inspector general's office for the Troubled Asset Relief Program in November said it had shut down 85 alleged online loan modification schemes that defrauded homeowners through Google ads.

    "Google has a natural long-term financial incentive to make sure that the advertisements we serve are trustworthy so that users continue to use our services, and we aren't afraid to take aggressive action to achieve that goal," the company said.

    To end the sting, federal agents killed off Mr. Whitaker's fictional character. They sent the Google employees a final email, allegedly from Jason Corriente's brother, saying the online entrepreneur died in a car crash.

    Mr. Whitaker, who pleaded guilty and faced a maximum 65-year prison term, was sentenced in December to six years, following what federal prosecutors called "rather extraordinary" cooperation. He is due for release in two years.

    —Amir Efrati and Amy Schatz contributed to this article.

    JANUARY 25, 2012

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