Google Drugs Update: City of Orlando Police Pension Fund v. Lawrence E Page, Sergey Brin, Eric E Schmidt, L. John Doerr, John L Hennessy, Ann Mather, Paul S Otellini, K. Ram Shriram, Shirley Tilghman and Google Inc

MTP readers will no doubt remember the “Google Drugs” case–where Google paid a fine to the US Government of $500,000,000 of the stockholders money to keep their senior executive team (at least) from being indicted for violating the Controlled Substances Act.  How did Google manage to do that?  By some pretty in depth collusion with con man David Whitaker to sell prescription drugs without a prescription to whoever wanted them.  Including kids.  Techies can relax–even Wired Magazine has called them out for these debased acts (see “Drugstore Cowboy“):

For their next ruse, the Feds asked Whitaker to advertise an even dicier site—one selling RU-486, better known as the abortion pill, which is normally taken under close supervision of a doctor. Like the earlier site, was designed to be as explicit as possible. “We understand accidents happen,” the front page copy read. “When they do we don’t ask why, we’re only here to help.” In another section, the site promised to fill prescriptions over the phone, “without the embarrassment of going to a pharmacy.”

To prove that Google’s behavior was widespread, Whitaker went through a different rep—one that the country manager of Google Mexico helped connect him with and who showed no more resistance to Whitaker’s schemes. Despite the site’s open promise to sell RU-486, it passed Google’s policy review on its first try, without any objections. Working with his rep, Whitaker spent $25,000 on ads against a series of explicit search terms: “abortion,” “abortion services,” “medical abortion,” and “RU-486.” None of the ad buys triggered any red flags from Google.

Whitaker kept designing new sites, working with different Google account reps to advertise ever sketchier online businesses. sold psychotropic drugs. “TaoTeWellness is a provider of the medications listed on this site,” the homepage read, above photos of Valium and Xanax. “There are no embarrassing doctor’s visits involved.” It was hard to be more up front than that, but Google’s reps in China didn’t just approve the site. They also added more than 100 drug names as search keywords, without even asking Whitaker.

The multi-year and multi-agency sting operation resulted in Google signing a nonprosecution agreement with the US Department of Justice to avoid being tried for crimes.  This would be the one that Senator Cornyn questioned Eric Schmidt about at the Senate Antitrust Subcommittee hearing on Google.  When Eric Schmidt invoked his Constitutional protection from self incrimination.  No, I’m not talking about Sam Giancana.

Eric Schmidt took the 5th.

Now why would he do that?  Aside from the fact that he probably knew no reporter would write about it without asking permission of Google and if they did, the Google PR machine would have a chance to tamp it down, probably in the form of Jill Hazelbaker (head of corporate communications at Google). Nothing to see here, move along.

One reason is because the Google board and a number of senior executives are being sued by Google stockholders for, among other things, breach of fiduciary duty.  This is partly because Google knowingly overstated its earnings from illegal stuff.  And we’re not even talking brand sponsored piracy or human trafficking here, but it’s essentially the same idea.

So joining in these very serious derivative lawsuits is the Google stockholder the Orlando Police Pension Fund, who one can easily imagine take a very dim view of their investment in Google being used for ostensibly criminal purposes.  And these are guys who know a RICO when they see one.

As usual, Google has reacted with an obsession for secrecy reminiscent of Richard Nixon.  One interesting passage from the complaint:

Plaintiff made a demand on Google’s board of directors (the “Board”) to, among other things, investigate and bring an action against those senior executives responsible for Google violating the Drug Marketing Statutes which caused, in turn, Google’s forfeiture of $500 million to the U.S. Government.

The Board constituted a committee (the “Committee”) which produced a 149-page report (the “Committee Report”) which it refused to make public but, nonetheless, served as the basis for a six page letter (the “Demand Refusal Letter”) refusing to act on the demands made on the Board. As alleged below in greater detail, the Board has improperly refused and continues to refuse demand and, therefore, Plaintiff is filing this action in order to seek redress on behalf of the Company.

So the Google board of directors used the stockholders money to prepare a report about the stockholder’s lawsuit, but the board won’t share that report with the stockholders whose monies they used to prepare it?

Why so secret, kitty cat?

After all, “if you have something you don’t want anyone to know, maybe you shouldn’t be doing it