Image by Aray Chen via Flickr
Hot on the heels of my previous post about Internet Goliath Google, is a sister story from today’s Wall Street Journal. Learning that it got caught in a web of its own lies was too good an opportunity to let slip.
Con Artist Starred in Sting That Cost Google Millions
by Thomas Catan
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. …
Now let’s mosey along to part 2…to see how the sting…went down…