Google CEO Knew About Illegal AdWords Sales, Report Claims

In the wake of Google’s agreement with the Department of Justice (DOJ) to forfeit $500 million for selling internet ads to illegal Canadian Pharmacies through AdWords program, new information is being reported that co-founder and CEO, Larry Page, knew about the illegal ads.

According to a statement from the DOJ, the $500 million settlement represents the gross revenue received by <"">Google as a result of Canadian pharmacies advertising through Google’s AdWords program, plus gross revenue made by Canadian pharmacies from their sales to U.S. consumers.

CNET reports that an official with the Justice Department told the Wall Street Journal that Larry Page was aware of the illegal sales to foreign pharmacies that were targeting ads to United States consumers. Peter Neronha, the U.S. attorney for Rhode Island, told the Journal that Page may have known about the sales for a number of years, said CNET.

The Journal explained that Google Inc. had carried ads for unlicensed pharmacies but it was only after reviewing some four million documents that investigators detected internal emails and other documents indicating that Page knew about the allegedly illegal ad sales. As part of the multi-million dollar settlement, the emails will not be released and a trial—and disclosure at trial—will likely be averted, noted the Journal.

“Larry Page knew what was going on,” Neronha said, wrote the Journal. “We know it from the investigation. We simply know it from the documents we reviewed, witnesses that we interviewed, that Larry Page knew what was going on,” Neronha added. In response, said a Google spokesperson writing to CNET in an email, “As we’ve said, we take responsibility for our actions…. With hindsight, we shouldn’t have allowed these ads on Google in the first place.”

Google admitted wrongdoing in the settlement and that it inappropriately allowed Canadian pharmacies to run the ads targeting Americans, said the Journal. The settlement did not, however, make specific note of Page or any other executives, said the Journal, which pointed out that it’s against the law for foreign pharmacies to send prescription medications to customers in the U.S.

It seems that Google reached the settlement to avoid prosecution. “Suffice it to say that this is not two or three rogue employees at the customer service level doing this on their own,” Neronha said in an interview. “This was a corporate decision to engage in this conduct,” Neronha added, wrote the Journal.

Meanwhile pharmacy regulators in the U.S. warned Google as far back as 2003 and, again, in 2008, that it is illegal to import drugs, said the Journal, citing letters it reviewed. The ads stopped in 2009 when Google learned of the Justice Department’s investigation, according to the Department, wrote the Journal.

The scandal has already prompted one Google shareholder to file suit against the company, claiming Google and its officers breached their fiduciary duty by facilitating illegal imports of prescription drugs through the AdWords sales. As we reported previously, the Google shareholder lawsuit was filed in federal court in San Jose, California; the derivative lawsuit was filed on behalf of the company and its investors by a Google investor from Pennsylvania. The complaint alleges that Google’s annual reports from 2003 to 2009 were false and misleading because the company didn’t disclose revenue from the improper advertising. It further alleges that Google’s board and CEO Larry Page knew or should have known it was illegal for pharmacies outside the U.S. to ship prescription drugs into the country.

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