The Wall Street Journal has an excellent page-one story today on how federal agents caught Google deliberately breaking the law so it could make money off sites selling drugs online. That case ended with a settlement in which Google avoided criminal prosecution by paying the feds more than half a billion dollars.
The Journal’s leder traces how the government employed a con artist to run a sting operation to catch Google breaking the law by knowingly selling ads to illegal prescription drug sites that pitched stuff like steroids, abortion pills, and oxycontin.
It’s a heckuva tale: How a convict in leg irons ran a sting that cost “Don’t be evil” Web goliath $500 million and had it sweating a criminal prosecution. David Whitaker is quite the con artist too. The Journal reports he flew on private jets, paid $200,000 a month for a Miami rental and scammed customers out of millions of dollars, fleeing to Mexico to start up in the online-pharmacy business.
When he was arrested and returned to the U.S., agents tried to verify his Google claims with a sting, which gives the WSJ its lede of a man in leg irons showing agents how he could get Google to sell him ads. They created fake websites and used a government credit card to pay Google hundreds of thousands of dollars for ads:
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…
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.”
Everybody, including me, seems to have missed the government’s allegation reported last summer: that Google executives, including CEO Larry Page, knew about this stuff and condoned it, which shows why the government at least threatened the company with prosecution:
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…
“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.”
The Journal pointedly compares how the feds’ actions against Google resemble those it used against criminal organizations:
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.
It’s worth noting that these kinds of anti-racketeering tactics have also been critical to the success of the government’s insider-trading investigations, which have now resulted in dozens of arrests. What, if anything, does it say anything about the nature of modern corporate law-breaking that these types of tactics are now being used to nail high-profile cases?
If there’s something missing in the Journal’s piece, it’s any mention of the First Amendment implications raised by the case (not to mention the War on Drugs). Here’s a letter to the editor that ran in The Providence Journal after it reported last August on the Google drug-ad settlement:
Front-page headline Aug 25: “Google pays penalty due to R.I. probe, Search giant acknowledges facilitating sales by ‘rogue online Canadian pharmacies”’.
On Page 7 of the, same paper, look at the advertisement by “betterthanmedicare.com,” a Canadian outfit. Will The Journal be next to pay a multimillion-dollar penalty for putting the health of its readers in jeopardy?
Vincent Campagna
Bristol
Good question.
The problem with elitist news-media is their robotic assumption that govt authority is beyond question. In fact, federal drug laws are unconstitutional and usually tyrannical; therefore they are not laws at all. End the federal drug war.
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#1 Posted by Dan A., CJR on Thu 26 Jan 2012 at 05:12 AM
I strongly support the idea that the law and it's enforcement should aim to reduce harm rather than inflict revenge or enforce matters of taste. I'm also convinced that 'the war on drugs' has done more harm than good and that disproportionate penalties for personal possession offences do more harm than the crime.
Putting that to one side however, in corporate situations things seem to be handled very differently.
Why are corrupt company directors allowed to avoid personal criminal liability for their actions by paying large fines, effectively ripping off their share holders?
Surely those individuals responsible should be held personally criminally liable. If there is also a corporate responsibility then fine the company as well, not instead. Corporate responsibility would improve dramatically if directors who knowingly engage in or authorise criminal behaviour are held personally responsible.
#2 Posted by Prosthetic Head, CJR on Thu 26 Jan 2012 at 06:06 AM
@ Prosthetic Head
It's because central govts are unduly glorified protection-rackets. Pay up and you get influence, immunity, monopoly, etc. Don't pay up and you get "regulated," fined, audited, jailed, "suicided," etc.
#3 Posted by Dan A., CJR on Fri 27 Jan 2012 at 02:36 AM
I am an attorney working with David Whitaker. I am very familiar with his criminal history, his cooperation with the authorities in the Google investigation, and his personal background.
While I can understand the desire for unrestricted access to legitimate drugs at inexpensive prices and the fear that the Goverment only regulates to benefit American manufacturers, in my 20 years of criminal defense I have seen the damages brought on persons, families, and others from the abuse of drugs; pharmaceutical grade or other.
The truth is that this is not a constitutional question of personal freedoms. The bodybuilder that uses steriods does not eventually suffer alone. His family, friends, and the community suffers as well, whether it be by having to provide care and support, but also in providing health care at a cost we all bear.
In this case, Google was well aware that they were dealing with cartel distribution and bathtub manufacturing, not legitimate foreign manufacturers.
Although no drugs were distributed, as designed, these drugs were toxic, dangerous, and deadly, both in composition and dose.
There has to be a distinction between the fight of over-regulation of legitiate pharmaceauticals and those who strive to purchase these drugs without prescription and those who are willing to make hundreds of millions on that market.
David is not, by any means, an angel. He is brilliant. He has taken the first step toward redemption. He asks for nothing. He is dedicated to paying back those who he has harmed and contributing meaningfully.
#4 Posted by Joseph J. Balliro, Jr, CJR on Thu 2 Feb 2012 at 04:08 PM
So, by that logic, Prosthetic Head: gov't unless it gets paid cracks down on successful business. let's not ignore the high level buy in here just because your search engine is cute. Gov't not the problem here [in this case], the corporate is. google was right behind Obama when schmidt was CEO...that co. is creepy and you better watch out people.
sheep no more!
#5 Posted by Rev Maximus, CJR on Sat 4 Feb 2012 at 10:48 PM