Americans are freedom loving people, and nothing says freedom like getting away with it.

From A Long Long Time by Guy Forsyth

The thing about public relations is that it works.  When famous personalities or executives have very carefully cultivated public images, large numbers of people come to be emotionally invested in them, a kind of mass hysteria.  Rarely does anyone criticize them in any sustained way.  Such a critic would have to be willing to withstand a lot of abuse and most people just aren’t cut out for that.

For a prosecutor to be able to even open an investigation into such people takes a lot of juice.  And that prosecutor had better be able to make their case successfully because such people will fight to the bitter end.  As they should.  But in some cases, their fight will not only be in the courtroom, not only in the press, but will also be inside the very agency that was created to protect the public from the behavior being prosecuted.  And they’ll try to rid themselves of this meddlesome and over zealous prosecutor.  How many times have you heard that one?

One thing all such people have in common is that very few fans would have ever believed the celeb did the thing for which they went to prison because of the PR image that these defendants created for themselves.  This is why we have trials.  Sometimes their very existence is about image and advertising, controlling their messaging through the mass media.  Often the only way to square the reality of their bad behavior and the image they’ve created seems so simple.

They lie.

And the arrogance that made them think they could get away with the bad behavior in the first place makes lying seem like the right thing to do.  Why?  Because they have always made the lies stick, they have always slid it past the public, they have always deceived the government into looking the other way, they have deceived their customers, or even just the fans.  They have sometimes threatened whistleblowers with who knows what rough justice.

Because nothing says freedom like getting away with it.

If you asked around suburbia in 1999 about when Martha Stewart would go to prison, you would have been laughed out of the room.

If you had told Wall Street types in 1997 that in a few years time Enron would be bankrupt and most of its senior executive team would be in prison, you would have been laughed out of the room.  Because Enron was untouchable and politically connected.

If you had told a room full of MBAs in 1985 that in a few years time, Michael Milken would be in prison and Drexel Burnham Lambert would be bankrupt–laughed out of the room.

And at the end of the day, these people just broke the rules of the markets.  They did it to a greater or lesser degree–and they lied about it. They made a little money under the table.  OK, a lot of money.  But here’s what they did not do.

They didn’t promote the sale of drugs to kids, they didn’t distribute sex trafficking apps, they didn’t create a government within a government.  They didn’t run a network of academic assets, bloggers, and probably journalists to further their interests.  They didn’t host celebratory meetings for themselves inside the White House promoting their big concerns about drugs at the same time that they were negotiating the biggest corporate fine in history for promoting the indiscriminate sale of illegal drugs.  They didn’t use cy pres awards in highly suspect class action rulings to fund many of their shills.  They didn’t loan their employees to political campaigns and they didn’t shape search results to further their own interests.  They didn’t park their jets at a NASA airfield, either.

They didn’t get caught selling advertising for counterfeit Olympics tickets and tell the world that they intended to keep the money.

But one thing that Enron and Drexel have in common with Google is that they both developed incredibly complex financial instruments.  Enron called them derivatives, Drexel called them junk bonds.  Google calls it Adsense.  There are aspects of Adsense that are very complex and they even use a trading desk system that is very similar to derivatives trading.  And just like derivatives trading it is largely off the books and almost entirely in the control of Google one way or another.

You could call that a “lack of transparency,” but that sounds like PR spin, too.  Here’s what it is–dark, hidden and I believe fraudulent.  It’s very complex, in fact it’s so complex that only Google really has all the information to know what’s going on.  As David Lowery said, complexity is very often fraud.

Here’s another difference between Google and their predecessors:

The advertising being sold–fraudulently, I believe–involves every Fortune 500 company.  It involves mom and pop stores, small to medium sized businesses who rely on Google for advertising their companies.  So there are a lot of people who want to believe that they have not been had.  That they have not screwed up.  Who don’t want to have to explain to their bosses what in the world they were thinking to trust these guys at Google.  Because when this all unravels, it’s going to seem obvious.

You may be one of these people who are bought into the Google reality, there are a lot of them.  So when you hear this story, just remember to check your carefully crafted impression of Google and its executive team at the door.  They want you to believe.  You know, “don’t be evil” and all.

But just imagine for a moment what would happen if they were lying.  Bigger lies than Martha, Ken and Michael.  Far bigger.  Perhaps even lying to you personally.  What if Google was corrupt to its core?

What if they were?

Where Did the Money Go?

Google released a report about the measures it takes against piracy online (just in case 20 million DMCA notices a month received by Google isn’t enough to tip you off that there’s something rotten in Mountain View).  In the report was this line:

This was the first time I saw Google acknowledge terminating a specific number of Adsense accounts.  Two things caught my eye about this statement.  First, the cumbersome wording.  “Google disabled ad serving to 46,000 accounts”.  That’s a forward looking phrase that does not deal with the status of the account.  Wouldn’t you have more naturally said, “Google terminated 46,000 Adsense accounts”?

But the main thing that I thought was important about this sentence is that it does not state what happened to the money.  And if you’ve followed Google for any length of time regarding its complex world of copyright infringement that profits it so well, you know that Google is all about following the money.

Instead of following the money down the rabbit hole of the complex advertising system that only Google can observe in its entirety, let’s just go back one step.  If Google cancelled 46,000 Adsense accounts, where did the money go?

This report was released in September 2013.  On March 13, 2014, Katherine Oyama, a Google lawyer, testified to the House IP Subcommittee that Google had terminated even more Adsense accounts:

So we know that Google has admitted terminating 46,000 accounts during 2012 and nearly double that number after 2012, presumably between January 1, 2013 and March 13, 2014 or thereabouts.

As I noted in my briefing to the USC Institute on Entertainment Law and Business in 2013, no one has asked how much money was involved in cancelling these accounts or where it went when the accounts were cancelled.

If these accounts were all in the long tail, there might have been a minimal amount of money involved.  But if these accounts had earned say $5,000 each on average, that would be a payment of $230,000,000 that went somewhere.  And $10,000 each would obviously have been double–$460,000,000.

The same calculation for the 73,000 sites would result in $365,000,000 for a total of $595,000,000 at the $5,000 rate and $730,000,000 at the $10,000 rate for a total of $1,190,000,000.

And that’s real money.  Let’s also point out that when a company like Google says they have “ejected more than 73,000 sites” there’s no telling what the number actually is, other than that it is more than 73,000.

I have heard for years that Google has a practice of terminating Adsense accounts and keeping the money.  In fact, I have heard the practice referred to as “part of Google’s business model.”  Even I did not take that literally.

Google is being sued for this very thing by SMS Telecom which alleges:

So why did I choose the $5,000 and $10,000 thresholds?  Partly because $5,000 and $10,000 is not enough for most people to sue over.  It is very unlikely that anyone will make a real stink over losing that account–particularly if the people getting cancelled don’t know about each other.  Partly because it illustrates that based on Google’s own disclosures, this could be significant amounts of money even at relatively low levels on a per cancellation basis.

It’s the kind of thing that could certainly help a quarterly financial result or revenue target–and of course, it’s all reportable income, so it must be somehow reflected on Google’s Sarbanes-Oxley compliant accounting statements, right?  Who’s their public accountants again?  Arthur Anderson?

But I chose these thresholds for another reason–these are the thresholds that an apparent Google whistleblower has identified in a startling post on Pastebin, that Google of course denied.  The Pastebin whistleblower posted a Wikileaks-worthy follow up threatening to name names and reveal documents.  She–I suppose a she–was quite clear that she feared Google.  Why?

The Wall Street Journal may have an answer to this question based on a statement made by Google’s lawyer Boris Feldman in open court (“Did DOJ Apologize to Google for US Attorney’s Comments?”):

“The U.S. attorney in Rhode Island went off the reservation and gave a long interview about all the evidence [a reference to the 4,000,000 documents that Google produced in the grand jury proceeding] and why it was he was so excited about the case,” lawyer Boris Feldman told the judge at a Delaware state court. “It ended up being so far off the reservation that the Justice Department apologized to Google for it and muzzled him.”

So when the U.S. Department of Justice apologizes to a defendant who paid what was then the biggest fine in history for violations of the Controlled Substances Act, why would a mere employee ever feel exposed?

Continued in Part 2