[August 25, 2011] Google pays penalty due to R.I. probe Tweet PROVIDENCE, Aug 25, 2011 (The Providence Journal - McClatchy-Tribune Information Services via COMTEX) -- Google, the titan of Internet search whose informal motto is "don't be evil," has paid the government $500 million as a penalty for its admitted facilitation of illegal sales of prescription pharmaceuticals from abroad to U.S. customers. For years Google carried advertising on its search result pages from "rogue online Canadian pharmacies" for the sale and importation of prescription drugs despite repeated warnings that it was acting illegally, Peter F. Neronha, U.S. Attorney for Rhode Island, said at an announcement of the payment Wednesday. The pharmaceuticals were sold without prescriptions, and many were counterfeit, had incorrect amounts of active ingredients and were prepared and stored in filthy conditions, according to officials. "This dangerous, irresponsible conduct by Google has stopped" as a result of a federal criminal grand jury investigation based in Rhode Island, Neronha said. Top corporate officers such as Google co-founder and chief executive officer Lawrence "Larry" Page were well aware that the company had crossed the line, he said. Investigators wormed their way inside Google with the help of David Whitaker, who is accused in an unrelated multimillion-dollar Internet fraud largely based in Providence. He was illegally selling drugs from Mexico, while a fugitive from the fraud case in Acapulco, through Google ads. They created seven phony drug-selling websites that gave them a cover for dealing with Google employees and learning about how Google handled its advertising and interacted with the foreign pharmacies. If an unwitting customer clicked on to one of the undercover sites, which were operative for about four months, that attempted drug purchase went unfulfilled. The investigation was conducted from former North Providence School Department space used by a regional task force created for unrelated cases by the U.S. Food and Drug Administration Office of Criminal Investigations. Tens of millions of dollars from the forfeiture are expected to flow to local, state and federal agencies in Rhode Island that participated in the task force, including the office of the state attorney general, the state police, the state National Guard and the North Providence and East Providence police. The money will be divvied up under the federal asset forfeiture process. The $500 million, thought to be among the top five corporate payments ever made to the U.S. Department of Justice to settle a criminal or civil investigation, represents a forfeiture of the estimated gross revenues Google and the pharmacies generated through the illegal trade from 2003 through 2009 while using Google's AdWords program, federal officials said. All of the money comes from Google, however. Google, which holds itself out as a paragon of corporate virtue, had little to say Wednesday. "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 [news] coverage this settlement has already received, we won't be commenting further." In a public filing with the Securities and Exchange Commission in May, Google disclosed that it had set aside $500 million to resolve an investigatory case with the Justice Department. Google took other corrective actions related to a "nonprosecution agreement" between the government and Google that was made public Wednesday, such as requiring online pharmacy advertisers to be certified by the National Association of Boards of Pharmacy, a group of state pharmacy regulators. Neronha and Kathleen Martin-Weis, acting director of the FDA's Office of Criminal Investigations, said the investigation ventured into novel legal territory regarding the responsibility that Internet search engines and information aggregators have for their content. And, it is the first time, officials said, that a search engine has been held liable for assisting in the unlawful distribution of drugs. At one point, according to Neronha, Google tried to argue that it could not be held liable for the content of its ads. But as far as the U.S. Attorney is concerned, the company was aiding and abetting illegal activity. "Google wasn't just a passive conduit," Neronha said; it was getting paid and it was actively engaged in facilitating the illegal sales. The shipment of prescription drugs from pharmacies outside the United States to customers in the U.S., generally speaking, is a violation of the Federal Food, Drug and Cosmetic Act and, in the case of controlled prescription drugs such as narcotic painkillers, the Controlled Substances Act. Google, officials said, was on notice as early as 2003 about the illegal sales and repeatedly was warned to stop the advertising by the National Association of Boards of Pharmacy. Most of the illegal operators are based in nations other than Canada and had only a nominal Canadian presence -- just enough to take advantage of Google's advertising policy. Google ostensibly allowed its U.S. audience to be targeted for foreign drug ads only from online "Canadian pharmacies." "It's a selling point," Neronha said of the Canadian link, playing off Canada's image to Americans as a safe and reliable place. Eighty-five percent of the drugs sold through AdWords, according to Martin-Weis, originated in nations other than Canada. Asked why a major probe was run from a small place like Rhode Island, officials said it was an outgrowth of the apprehension of Whitaker by the U.S. Secret Service in 2008 in the Providence case. The Secret Service referred their leads on Whitaker's knowledge of Internet drug sales to the FDA task force in North Providence. Google already wired the $500 million to the government and it is on deposit until the forfeiture process runs its course and the shares are determined. Col. Steven G. O'Donnell, state police superintendent, said he expects that his agency alone will receive tens of millions of dollars. There are strings on federal forfeiture money that allow the money to be used for law-enforcement purposes, but prohibits its direct use to balance state and municipal budgets. The task force has been paid for with earlier proceeds from the forfeiture program. The investigation of Whitaker's original fraud began in March 2006, the Google probe then took off in 2008, and investigators set up the phony Web sites in 2009. Investigators sifted through more than 4 million documents, including Google financial records and e-mails. In 2009, after investigators showed their hand, Google began its reforms. Whitaker has been in prison since his arrest and he has agreed to plead guilty to charges in the original fraud involving the defunct Mixitforme, an Internet seller of consumer electronics. Customers and vendors were bilked of $13 million. Neronha said Whitaker hopes for a more lenient sentence in return for his help in the Google probe. With reports from staff writers Randal Edgar and Philip Marcelo [email protected] ___ (c)2011 The Providence Journal (Providence, R.I.) Visit The Providence Journal (Providence, R.I.) at www.projo.com Distributed by MCT Information Services [ Back To TMCnet.com's Homepage ]