More details have emerged about a federal sting that led Google to pay $500 million to settle allegations that it allowed illegal online Canadian pharmacies display Web advertisements in the U.S., the Wall Street Journal reports (Catan, Wall Street Journal, 1/25).
Background
Companies are liable for ads on their website that violate federal law.
On August 24, 2011, the Department of Justice announced that Google had agreed to the $500 million settlement over allegations that it allowed Canadian-based "rogue pharmacies" -- which offer counterfeit medications or do not require valid prescriptions -- to run ads through AdWords, Google's self-service program that allows users to post ads next to relevant search results.
The settlement covered revenue that Google received from the illegal advertisers, as well as revenue that the Canadian pharmacies received from U.S. consumers. As part of the agreement, Google did not face criminal charges (iHealthBeat, 8/24/11).
New Details About Sting
According to the Journal, the federal government built its case against Google through an undercover operation that used aliases, fake companies and federal money.
For the sting, David Whitaker -- a federal prisoner and convicted con artist -- posed as an agent for rogue online pharmacies in numerous phone calls and emails with Google sales representatives (Wall Street Journal, 1/25).
When the undercover operation started in 2009, Google had policies in place to prevent illegal online pharmaceutical advertising. Whitaker said Google first rejected his efforts to sell online ads for rogue pharmacies but later worked with him to find a way around the company's advertising policies (Lee, Ars Technica, 1/25).
By mid-2009, Whitaker and the federal agents had purchased numerous Google ads for sites selling controlled substances without a prescription. Whitaker said, "Google's employees were instrumental in bypassing policy regarding pharmacy verification," adding, "The websites were blatantly illegal."
In the summer of 2009, federal agents informed Google executives about the evidence they had collected against the company, and federal prosecutors served grand jury subpoenas.
Google reached the $500 million settlement with the Department of Justice two years later (Wall Street Journal, 1/25).
Google Response
Google declined to comment on the new details that have emerged about the federal sting, Ars Technica reports.
A company spokesperson said, "As we've said, we take responsibility for our actions," adding, "With hindsight, we shouldn't have allowed these ads on Google in the first place" (Ars Technica, 1/25).
Google says that it has strict policies in place to prevent the illegal use of its ad services and that it bans advertisers who repeatedly violate its guidelines (Wall Street Journal, 1/25).