Google Now Faces Two Lawsuits Over AdWord Sales to Illegal Online Pharmacies

Two lawsuits have been filed against <"">Google, its board of directors and some of its executives, including co-founder and CEO, Larry Page and the chairman, Eric Schmidt of breach of fiduciary duties by enabling illegal import of prescription medications. The lawsuits also name co-founder Sergey Brin and current board members John Doerr, of venture capital firm Kleiner Perkins Caufield & Byers; John Hennessy, the president of Stanford University; Paul Otellini, the CEO of Intel; Shirley Tilghman, president of Princeton University; and others, said ComputerWorld.

We just wrote that, in the wake of Google’s agreement with the U.S. Department of Justice (DOJ) to forfeit $500 million for selling Internet ads to illegal Canadian Pharmacies through its AdWords program, new information surfaced that Page, was fully aware of the illegal ads. A statement from the DoJ indicated that 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.

At the time, said ComputerWorld, Google acknowledged an error without admitting guilt. “It’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place,” Google said.

Both lawsuits were filed in San Jose federal court August 29 by two shareholders on behalf of Google and other investors. “The breadth and scope of the wrongdoing was astonishing,” said one lawsuit. “From 2003 to 2009, Google knowingly assisted Canadian pharmacies in advertising the illegal sale of prescription drugs,” it continued, reported ComputerWorld.

Both suits charge Google’s directors—including Page, Schmidt, and Brin—with violating their corporate duties and throwing away company money by permitting foreign pharmacies buy online ads via AdWords, said ComputerWorld. The complaints used language in the DoJ’s press release and indicated that, according to federal investigators, Google knew as far back as 2003, that sending drugs from Canada into the U.S. was, for the most part, illegal.

The Wall Street Journal previously explained that Google Inc. carried ads for unlicensed pharmacies; however, it was only after reviewing some four million documents that investigators detected internal emails and other documents indicating 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.

“Larry Page knew what was going on,” Peter F. Neronha, U.S. attorney for Rhode Island 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. It seems that Google reached the settlement to avoid prosecution.

“Google’s quick response after learning about the [DOJ] investigation shows that the Individual Defendants could have, at any time of the six-year-long scheme, stopped the Company from assisting the online pharmacies,” one of the two lawsuits said, wrote ComputerWorld. The lawsuits demanded that the directors and executives pay back the $500 million pay damages, to be determined by a jury, to “punish defendants and to make an example of defendants,” reported ComputerWorld. At least one of the complaints alleges that Google’s 2003-2009 annual reports were false and misleading because the company didn’t disclose revenue from the improper advertising.

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