Late last week, the Department of Justice announced a settlement with Google of $500 million for working with illegal pharmacies to place ads for selling counterfeit drugs and selling drugs without a prescription. While websites aren't usually liable for just linking to an illegal site, they are liable for taking ad money from such illegal enterprises.
While it's good that the DOJ investigated the illegal activity by Google, one of the most disturbing aspects of the agreement is that apparent evidence of direct knowledge of the ongoing illegal activity by now-CEO Larry Page was sealed from the public:
"Larry Page knew what was going on," Peter Neronha, the Rhode Island U.S. Attorney who led the probe, told the Wall Street 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, who said he would not prosecute the company further, helped pour over 4 million-plus documents and discovered emails and other information that indicate Page knew of the illegal ads.He concluded that it was not a matter of a few rogue customer service workers enabling the ads, but a corporate decision to allow them. This documentation will be sealed as a result of the settlement between Google and the DOJ.
In other venues, I've campaigned for years for laws to end such secret settlements by public officials. Here's something I wrote four years ago which summarized why such settlements are wrong. What secret settlements do is bury deeper evidence of corporate malfeasance and thereby increase damage to other victims for years, even decades.
For example, while the first asbestos case was brought and settled in 1933, compensating 11 clients to the tune of $30,000 ($450,000 in today's dollars), because the settlements were kept secret, the asbestos manufacturers were able to continue exposing employees and the public to the dangerous substance for additional decades. Similarly, when Goodyear tires initially led to blowouts with the Ford Explorer in the early 1990s, evidence was buried in secret settlements for a number of years before being publicly discovered in later court decisions.
The DOJ seems to have dragged its feet for years in stopping the illegal ads. Apparently, Google was on notice of the problem as early as 2003, yet while the company barred illegal pharmacies from some countries from using its advertising services, Google actually continued to provide customer support from 2003 through 2009 to Canadian pharmacies selling drugs illegally.
That's a long-time for the DOJ to sit-on its knowledge of the illegal activity and do nothing, but it's an even longer time for Google executives to be on notice of the criminal activity and so nothing. And to have the details of that executive knowledge hidden from the public is a serious blow against transparency in government conduct.
A $500 million fine against Google is nothing to sneeze at, but if the settlement is covering up evidence of more systematic wrongdoing by Google, the case should have gone to trial with actual individuals held to account. Unfortunately, the public can't really know whether the prosecutors made the right call since they are allowing the courts to bury the evidence.
Illegal Pharma Ads Just a Small Part of the Problem: The problem is that the pharma issue is likely only the tip of the iceberg in Google's profiting from illegal advertising. An even bigger source of revenue for Google has been from the financial industry, including illegal scams preying on people seeking loan modifications. As I noted in my "Cost of Lost Privacy" series a few weeks ago, Consumer Watchdog in their Liars and Loans: How Deceptive Advertisers Use Google report detailed how at least 20 companies were running fraudulent versions of these services and paying Google to run these advertisements, with Google making as much as $8.29 each time someone clicked on a term like "stop foreclosure."
The history of Google executives condoning or at least looking the other way as illegal activity was conducted by Google advertisers is highly relevant to those investigations and the DOJ has apparently sealed that evidence as part of its deal with the company.
A number of states have banned settlements by prosecutors that bury evidence of company or executive wrongdoing. It would be nice if the DOJ followed their example.
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The liability protections afforded corporations, once necessary to encourage risk-taking, have been perverted into a shield against moral hazard and even justice itself.
Monetary penalties have lost their deterrence, becoming an item on a balance sheet, taken from the investors who had no part in the crime.
As they grow, so does their ability to do harm - and so grows the need for regulation, and the government to impose it.
If you want less regulation, reduce the liability protections for corporate management. Resurrect personal responsibility in corporate management.
Anyone else?
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