Google CEO Page Said To Avoid Potential Criminal Prosecution In Pharma Settlement

Last week the bombshell announcement came that Google was admitting liability and forfeiting roughly $500 million in profits and fees from accepting illegal ads from Canadian pharmacies targeting US residents. This is a historic “fine” according to the US Department of Justice (DOJ). But new information revealed over the past few days suggests that Google may have avoided a much larger problem: potential criminal prosecution of Google CEO Larry Page.

The DOJ “non-prosecution agreement” explains that Google was on notice since 2003 that licensed and unlicensed Canadian pharmacies were using AdWords to sell drugs to US residents and that the ads violated or potentially violated a number of US laws and FDA regulations. Now the US Attorney in charge of the DOJ probe, Peter Neronha, has said that Larry Page was personally aware of what was going on with the Canadian ads, as well as the fact that the ads were illegal.

Advertisers “Circumvented” Google Controls

It appears that starting in 2003 Google used two third party companies to verify that pharmaceutical advertisers were actually licensed in Canada and/or the US. However many unlicensed pharmacies were apparently able to defeat the system according to the DOJ’s documentation. The DOJ says that, beginning in 2004, Google was “on notice” that advertisers were “circumventing” the certification process and that Google did not prevent the unlawful AdWords from appearing until it became aware of the DOJ investigation.

Here’s what Neronha told the Wall Street Journal:

“Larry Page knew what was going on,” Peter Neronha, the Rhode Island U.S. Attorney who led the probe, said in an interview. “We know it from the investigation. We simply know it from the documents we reviewed, witnesses that we interviewed, that Larry Page knew what was going on” . . .  Mr. Neronha said he didn’t have any plans to prosecute Mr. Page or individual executives, although he said they weren’t off limits.

Is this a case of insufficiently rigorous controls by Google or does it reveal a kind of “willful blindness” or something even worse — an intentional violation of the law for financial gain? Google issued the following statement last week in response to news of the settlement:

“We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago. However, it’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place. Given the extensive coverage this settlement has already received, we won’t be commenting further.”

A “Mistake” or Something Willful?

This relatively bland comment asserts Google made a “mistake,” and was not committing a willful violation of the law. However Google critics such as lawyer Gary Reback and Harvard Professor Ben Edelman argue that Google knew the conduct was illegal and sought to profit from it. Reback told USAToday that “Google operated as an illegal drug distribution channel for illegal drug importers and made money doing it.”

Edelman goes further, arguing that this settlement and the underlying conduct outlined by the DOJ “undermines Google’s credibility” across the board:

These admissions and the associated documents confirm what I had long suspected: Not only does Google often ignore its stated “policies”, but in fact Google staff affirmatively assist supposed “rule-breakers” when Google finds it profitable to do so…

In June I observed that Google’s bad ads span myriad categories beyond pharmaceuticals — charging for services that are actually free, promising free service when there’s actually a charge, promoting copyright infringement, promoting spyware/adware, bogus mortgage modification offers, work-at-home scams, investment rip-offs, identify theft, and more.

Persistent Google critics such as Edelman see this as a “gotcha” moment where Google’s bad behavior is laid bare for all to observe. However I’m less certain this is a conspiracy revealed. But it also doesn’t seem like a simple case of Google not paying close enough attention either.

Postscript: A shareholder civil suit has now been filed against Google’s Board of Directors for breach of fiduciary duty over the episode, seeking unspecified damages.

Related Topics: Channel: SEM | Google: AdWords | Google: Critics | Google: Legal | Google: Outside US | Legal: Regulation | Top News

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About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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  • http://www.onelittledesigner.com Jeremy Hawes

    This article seemed to suggest that Google was not taking blame for their actions and calling it a mistake vs willful. Everything I’ve learned about this case is quite the opposite – it was one of the few times in history when a large corporation admitted fault – Google didn’t say it was a mistake, but that they screwed up and were sorry.

  • http://screenwerk.com Greg Sterling

    I’m giving Google the benefit of the doubt. But re the “admission,” that was compelled as part of the settlement. It’s not out of the goodness of Google’s heart that they do that.

    The question is: did Google know the ads were illegal and continue to willingly accept them because they represented a lot of money? Critics argue “yes,” “guilty.” I’m saying something else: I don’t believe that this is a conspiracy exposed. But it’s not simple negligence either.

  • John Nagle

    In DOJ’s words, “During the ensuing investigation of Google, the government established a number of undercover websites for the purpose of advertising the unlawful sale of controlled and non-controlled substances through Google’s AdWords program”. Google accepted the ads, and AdWords staff actively cooperated in getting the ads up. This did not happen by accident, and it wasn’t just about Google allowing ads for legitimate pharmacies in Canada.

    For the next two years, Google is on probation. If they do anything bad in the drug area, DOJ can proceed with criminal prosecutions based on Google’s past activities. Google has to be very, very careful from now on.

    Schmidt appears before the Senate Judiciary Committee on September 21, and will face some tough questions. Congress can ask for some of the evidence that DOJ would have used at trial, so we may see more information about the details of the sting operation.

    After something like this, executives are usually fired. Who gets the axe? Any rumors yet?

  • TimmyTime

    >>> “However I’m less certain this is a conspiracy revealed. ”

    Yeah, those illegal drug ads escaped google for years, when they ban people for life over tiny mistakes. DOJ has emails where Larry the Fraud knew and approved of them. Bing “Larry Page Canadian pharmacies DOJ WSJ” and see. Larry knew and approved them to make money:
    “”Larry Page knew what was going on,” Peter Neronha, the Rhode Island U.S. Attorney who led the probe, told the Wall Street Journal. “We know it from the investigation. We simply know it from the documents we reviewed, witnesses that we interviewed, that Larry Page knew what was going on.”"

    >> it was one of the few times in history when a large corporation admitted fault – Google didn’t say it was a mistake, but that they screwed up and were sorry.

    Criminal prosecution of the founder and the shattering of the myth that they aren’t greedy does wonders in admitting ‘mistakes’ and paying a small fee. No wonder they rig organic SERPs, it’s safer and harder to spot than selling illegal drugs.

  • http://searchinfluence.com/blog/ Douglas Thomas

    I can’t really see any lasting effect here. This is over policies Google ended two years ago; they already had money set aside for the settlement as early as May; and Google already has a bit of a anti-government take when it comes to stuff “they” might not agree with, especially if you look at how Google acted in China.

    The case makes for good flamebait (especially for Aaron Wall fans), and certainly might be only the first of a set of revelations coming from the heightened US investigations to explain some policy shifts and the like, but it itself ought to have little effect. Neronha’s take on the case should be as discounted as Page’s — of course the prosecutor would say they had an open-and-shut case, of course the defendant would say he’s innocent. The public in both the US and Europe, has been affected little by investigations, if market share and stock price are used as telling metrics.

    For three takeaways from the original announcement, check out our take on it at http://www.searchinfluence.com/2011/08/500-million-google-pharmacy-ad-probe-settlement/

  • http://advance-web.com dmw

    Lighten up everybody. In case you’ve forgotten, the motto is “Do no evil”, not “Do no illegal”.

  • Ryan Go

    In your first comment you say “I’m saying something else: I don’t believe that this is a conspiracy exposed. But it’s not simple negligence either.”

    There is not much room in between the two, so it’s hard to judge, then, where you stand and what the message is.

    Google ads brings in 96% of their revenues. I have experienced first-hand Google breaking their own policies when it goes to their benefit. When I combine those experiences with this article, it becomes very clear to me that there is a whole lot more going on with Google and their ads. And much of it seems to be illegal.

    For example: advertisers and publishers are not allowed to share how much each has paid or been paid for a particular click. There could be a lot of room in between the two, which possibly amounts to theft.

    @dmw: yes, good point.

  • http://screenwerk.com Greg Sterling

    Ryan:

    I don’t have enough information to make a definitive assessment. There may be a “robin hood” element here where Google thought it was doing some sort of service with cheaper Canadian drugs for US residents (provided certification) as well. There’s some suggestion of that.

    I don’t think it’s simply a case of Google saying we’re going to make money by hook or by crook, feds be damned. There’s more going on here than has come out obviously.

    In terms of “degrees of culpability” there are differences legally between negligence and willful illegal behavior. Somebody who intends to kill someone is treated very differently than someone who hits another person with his car and accidentally causes the death of that person. Dead body in both cases; different intent, different punishment.

  • http://europeforvisitors.com Durant Imboden

    It seems to me that Mr. Neronha, the U.S. Attorney, has an awfully big mouth. He says he “knows” that Larry Page knew what was going on. If that’s true, why didn’t he prosecute?

  • http://screenwerk.com Greg Sterling

    Yes, I’m surprised by the “aggressive” comments to the WSJ. Maybe he wanted to prosecute and didn’t get his way and this is an effort to publicize what he thought was criminal wrongdoing.

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