U.S. Attorney: Larry Page Was Personally Aware That Canadian Pharmacy Ads Were Illegal - Shareholder Sues Google Over Aiding Illegal Drug Sale

Following, last week's announcement that Google was admitting liability and forfeiting roughly $500 million in profits and fees from accepting illegal ads from Canadian pharmacies targeting US residents.The new information suggests that Google may have avoided a much larger problem: potential criminal prosecution of Google CEO Larry Page. The documents, emails, and witnesses confirm that […]

Following, last week's announcement that Google was admitting liability and forfeiting roughly $500 million in profits and fees from accepting illegal ads from Canadian pharmacies targeting US residents.

The new information suggests that Google may have avoided a much larger problem: potential criminal prosecution of Google CEO Larry Page. The documents, emails, and witnesses confirm that Google CEO Larry Page knew about and allowed ads from online pharmacies for years. However, as part of the $500 million forfeiture to the Department of Justice, these documents won't be released.

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 the US Attorney in charge of the DOJ probe, Peter 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.

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."

In a prepared statement, Google acknowledged that they were aware that violations were being made.

"It's obvious with hindsight that we shouldn't have allowed these ads," read the statement. What was happening specifically was that pharmacies were getting assistance in setting up and advertising their sites in Canada, but were not being restricted from changing their geo-location targeting to reach U.S. citizens. While aware of this and other sneaky ways to get into U.S. search, Google did nothing to prevent the tactics from succeeding.

Google critics, Ben Edelman, an anti-adware and spyware advocate who formerly worked as a consultant to Microsoft and lawyer Gary Reback 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 argues 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."

Update:

Bloomberg reporting that Google and its directors were sued by shareholder who claims they breached their fiduciary duty by facilitating illegal imports of prescription drugs, leading to a $500 million settlement with the U.S. government.

The complaint filed on Aug 29 in federal court in San Jose, California, by a Pennsylvania woman who owns Google shares.

Google's annual reports from 2003 to 2009 were false and misleading because the company didn't disclose revenue from the improper advertising, according to the complaint, which seeks unspecified damages.

Aaron Zamost, a Google spokesman, said the company hadn't seen the complaint and he had no immediate comment.

The case is McKenna v. Page, 11-04248, U.S. District Court, District of Northern California (San Jose).