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.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.