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The First Rule of Lawfare: Is Google’s Active Measures Campaign on Article 13 a Trial Run for Election Meddling by a US Non-State Actor?

October 28, 2018 Comments off

Well, I wake up in the morning
Fold my hands and pray for rain.
I got a head full of ideas
That are drivin’ me insane.
It’s a shame the way she makes me scrub the floor.
I ain’t gonna work on Maggie’s farm no more.

From Maggie’s Farm, written by Bob Dylan

Google on the Back Foot with the Copyright Directive

Google and Facebook recently suffered a lobbying debacle in Europe over the European Copyright Directive.  That legislation cuts back the European version of the what Americans call the DMCA safe harbor.  A triumph for artists, Google’s European loss was the worst lobbying defeat that Silicon Valley has been handed in a long time—at least since the SESTA legislation cut back another safe harbor in the U.S.  So it shouldn’t be surprising that YouTube’s CEO is trying to influence YouTubers to lobby on behalf of Big Tech—Google desperately needs some human shields, which is exactly what participating YouTubers would be.  Once again scrubbing the floor for the House of Google.

At its core, the Copyright Directive cuts back the ability of services like YouTube to profit from infringing activities on their platforms.   One would expect corporations profiting from that safe harbor to lobby against it, just like supporters lobbied for it.  But Google and Facebook went well beyond simply lobbying by attempting to sow discord and undermine democratic institutions.  

And they got caught—red handed.   They were caught conducting active measures such as spamming, bot farming and overt messaging campaigns calculated to undermine the legislative process in the European Parliament.  You can read about it in a number of leading European publications starting with investigations by both the Times of London and Frankfurter Allgemeine Zeitung.

 

screen-shot-2018-08-16-at-9-58-04-am

Google’s Article 13 Lobbying Campaign from Volker Rieck

 

Most importantly Google supporters like the Pirate Party promised—or more accurately “threatened”—that “constituents” would show up to protest, and very few did.  So Google’s active measures campaign lacked a human face—the key component that brought it down.

German MEP Helga Truepel explained why the plenary vote on the Copyright Directive was so lopsided against Google at a press conference :  “…[It was] due to this message spamming campaign. I talked to some of my colleagues here [and they] are totally pissed off, cause in the streets there were a maximum 500-800 people last Sunday [at Pirate Party protests]… and we were only deleting emails for weeks now.”

Plan B and the First Rule of Lawfare

Fast forward to today: Google needs a Plan B.  Desperately.

Google’s problem today is the Members of the European Parliament (and some members of the UK Parliament) are wise to their jive after the plenary vote.  My bet is that story is not yet concluded as it merits a criminal investigation.  Because when a corporate covert influence operation is discovered and attribution is certain, it’s hard to put that genie back in the bottle (just like Internet piracy).

But while Google desperately needs a Plan B to retain its safe harbor, publicly acknowledging its influence operation is politically awkward, bread crumbs or no.  Like fight club, the first rule of lawfare is that it does not exist.

Google and Facebook are struggling to find that Plan B as the EU lawmaking process continues with the “Trilogue”, the next step to the Copyright Directive becoming national law in the European Union.  Google seeks another way to overwhelm the system by finding human shields to mingle with the bots.  And that’s where YouTube CEO Susan Wojcicki comes in with her recent appeal to YouTubers to protest the Directive.

Ms. Wojcicki may want us to overlook that Google just got caught running active measures against a democratic institution to meddle in the legislative process on another continent.  But members of the European Parliament have not forgotten.  She may be able to pull the wool over YouTuber’s eyes, but it just makes her human shields look even more duped and her methods look especially more alarming—if not terrifying—in a post-Cambridge Analytica world.

Safe Harbors, Addiction and Human Shields

Don’t underestimate how important these safe harbors are to Google, Facebook and its fellow monopolists.  They were ready to be on the wrong side of child sex trafficking legislation to preserve their other safe harbor (Section 230 of the “Communications Decency Act”)—that surely strained Sheryl Sandberg’s performance as Wendy to Mark Zuckerberg’s “boy who wouldn’t grow up.”  These safe harbors are crucial to Google, Facebook and Twitter—because it protects them as they snort up the addictive content and reward (if not sell) views, likes, follows, and “engagement.”  

Remember—YouTube is not in the music business, or even in the content business at the end of the day.  Google and Facebook are in the addiction business.  

In particular the behavioral addiction business (see Irresistible by Dr. Adam Alter).  If you’re in the addiction business, safe harbors are very, very important.  Just ask the narcotraficantes.  And don’t forget—the U.S. Attorney for Rhode Island investigated Google for violations of the Controlled Substances Act that resulted in a $500,000,000 fine and a non-prosecution agreement (not to mention a shareholder lawsuit).

Straight Outta Minitrue

But I suspect it is the embarrassing lack of human shields cited by MEP Helga Truepel that drove Ms. Wojcicki to issue a meandering tl;dr blog post trying to convince “YouTube creators” to fall in with the company line on the Copyright Directive. 

Ms. Wojcicki manages to get through her entire appeal without coming clean about the point of the Copyright Directive—YouTube profits from piracy through the safe harbor that the Directive would cut back, especially Article 13.  (There’s way more to the Directive than Article 13, but that’s another story.)

She would have YouTubers sign up to the “sky is falling” claims that “the unintended consequences of Article 13 will put [the highly profitable YouTube] ecosystem at risk”.  Why?  Because “[i]t would be too risky for platforms to host content from smaller original content creators, because the platforms would now be directly liable for that content.”  

That is quite a leap—how is it that “smaller” YouTubers would be such a big problem?  After all of YouTube’s “advertiser friendly” changes that severely hurt the earning power of many YouTubers, does Ms. Wojcicki really think that YouTubers—a pretty clever bunch on the whole it must be said—are so gullible that they will miss the irony?  

And then she says this: “We are committed to working with the industry to find a better way.  This language could be finalized by the end of the year [in the Trilogue], so it’s important to speak up now.”

Given the breadth of the coalition supporting the Copyright Directive and opposing Google and Facebook, it’s not immediately clear who is “the industry.”  I can tell you that if she includes the music industry in that reference, I can save her some time.  

Nobody in “the industry” trusts Google, YouTube, Facebook or Ms. Wojcicki.  [Although the beachhead that Google scored with the MMA may make life interesting for publishers and songwriters wishing to protest against the hand that feeds the mechanical licensing collective.]  

And, frankly, I’d be surprised if many YouTubers trust her either.  Based on the vote supporting the Copyright Directive, there’s a wide swath of MEPs that have severe misgivings about all these Silicon Valley companies trying to run roughshod over Europeans.  And then there’s the two and probably soon to be three competition prosecutions against Google by the European Commission.  That’s a thing.

Ms. Wojcicki hasn’t learned (and I predict won’t ever learn) a simple truth that every record company and music publisher knows—don’t jack with the talent.  YouTube jacks with the talent frequently, so it’s unclear how the talent is going to react to this latest request that they take time out of their day to help YouTube.

It’s not a good look and it will come back to bite.  YouTube has been profiting from the safe harbor for its entire existence and wouldn’t know how to make an honest buck if their lives depended.

Is Election Meddling Next on Google’s Agenda?

Before Ms. Wojcicki tries to rally YouTubers as human shields to support Google’s billions on her bot farm, she needs to get her own house in order.

And members of the European Parliament need to get a grip on these active measures campaigns before Google goes beyond “lobbying” on an issue vote and moves on to meddling in campaign outcomes in a few months when the European Parliament stands for election.

In a post-Cambridge Analytica world, we all know it’s a short step from undermining opposition on a particular issue to undermining the election of a particular candidate.  And Google is just as capable of meddling as any state actor if not more so.

Sheryl Sandberg is shocked, shocked that there is bad behavior on Facebook

September 24, 2017 Comments off

This has been a bad few weeks for two out of the four members of the FANG cartel–Facebook and Google.  Their problems can all be summed up in a post by former Googler and current Facebook COO Sheryl Sandberg–yes, that Sheryl Sandberg, who is a leading contender for beatification by the Congregation for the Causes of the Commercial Saints and former defendant in the Google shareholder derivative suit over Google’s violation of the Controlled Substances Act.

According to Ms. Sandberg:

Last week we temporarily disabled some of our ads tools following news reports that slurs or other offensive language could be used as targeting criteria for advertising. If someone self-identified as a ‘Jew-hater’ or said they studied ‘how to burn Jews’ in their profile, those terms showed up as potential targeting options for advertisers.

Seeing those words made me disgusted and disappointed – disgusted by these sentiments and disappointed that our systems allowed this.

Could the problem be that Facebook’s “systems” are designed to “allow this”?  Just like Google’s “systems” were designed and optimized to allow selling advertising keywords for pirated recordings derived from artist names?

Luke Sample

And as was demonstrated by the FBI and Department of Justice sting operation, Google perfected selling search terms for illegal drugs?  As Wired reported in 2013, Sheryl Sandberg is no stranger to the issue of state of the art “systems” mysteriously allowing bad acts:

At one point during a meeting with [then inmate and former online illegal drug impresario David] Whitaker and his lawyer, the Feds asked him how he had grown his online enterprise. Whitaker’s answer was immediate: He had used Google AdWords. In fact, he claimed, Google employees had actively helped him advertise his business, even though he had made no attempt to hide its illegal nature. It was reasonable to assume, Whitaker said, that Google was helping other rogue Internet pharmacies too.

If true, this would be a bombshell. This was Google, after all. Since its founding, the search giant had prided itself on being a different kind of corporation, the “don’t be evil” company. And for almost as long, its open-to-all-comers ad policy had come under scrutiny. Online pharmacies were a particular sticking point; in 2003, three separate congressional committees initiated inquiries into the matter.

On July 22, 2004, a month before Google went public [and she cashed out big time], Sheryl Sandberg—at the time Google vice president of global online sales and operations—testified before the Senate Permanent Subcommittee on Investigations. Legislators had proposed two bills that would regulate online pharmaceutical sales, but Sandberg argued that the measures would be unduly burdensome. [Kind of like stopping child sex trafficking–too much trouble for elites in the Internet Associations membership.] She said that Google employed a third-party verification service to vet online pharmacies. She also described Google’s own automated monitoring system and the creation of a team of Google employees dedicated to enforcing all of the company’s pharmaceutical ad policies. “Google has taken strong voluntarily [sic] measures—going beyond existing legal requirements—to ensure that our advertising services protect our users by providing access to safe and reliable information,” she testified. Neither bill made it out of committee. (Sandberg, now Facebook’s chief operating officer, declined to comment or be interviewed for this story.) [I bet.]

However–at the same time that Ms. Sandberg’s people were crowing about their verification service, other Googlers were selling advertising keywords to criminals selling illegal drugs into the United States.  Google subsequently negotiated a non-prosecution agreement (kind of like a plea bargain) pursuant to which Google paid a $500,000,000 fine, evidently with the approval of Eric Holder, then Attorney General of the United States.  Google was represented in that deal by one Jamie Gorelick (Amazon board member and former Deputy Attorney General in the Clinton Administration, replaced by…Eric Holder.  Ms. Gorelick is employed by Washington DC swamp powerhouse law firm Wilmer Cutler Pickering Hale (former employer of Senator Elizabeth Warren).).

As Google (referred to as “the Company”) expressly acknowledged in the non prosecution agreement (which you can read here):

Non Prosecution Excerpt

So–Sheryl Sandberg has a very great deal of experience going back well over a decade with big rich Silicon Valley companies profiting from debased behavior.  Some might argue profits that she enjoyed herself in the form of stock awards, salaries and cash bonuses.

This is no doubt one reason why she was sued as a defendant in the stockholder derivative suit against Google (read the complaint here) that arose out of the $500,000,000 payment of the stockholders money to keep Google executives like her from being prosecuted criminally and potentially going to prison for facilitating the sale of illegal drugs to kids among other people.  (See also The Ryan Haight Online Pharmacy Consumer Protection Act of 2007, legislation sponsored by Senator Diane Feinstein and then-Senator now Attorney General Jeff Sessions.)

Remember–there’s no public evidence that I can find (and I’ve looked) that any of this bad behavior ever cost her a penny of her own money.

Shareholder Suite

Whether it’s drugs, hate groups, human trafficking or the Russians, Sheryl Sandberg has made lots of money exploiting human misery if you ask me.  I don’t quite see how she couldn’t have.

Given her carefully sanitized checkered past, should we accept the wringing of hands, wailing and mourning and rending of garments by an unimaginably rich power player like Ms. Sandberg?

I think not.  But that doesn’t mean there isn’t a different law for the Silicon Valley elites than there is for the hoi polloi.  Trust me, Sheryl Sandberg will never be held to account and will be able to buy her way out of prosecution yet again probably using the stockholders’ money yet again.

Forty State Attorneys General File Amicus In Support of Mississippi Attorney General Jim Hood’s Fight Against Google

June 30, 2015 Comments off

MTP readers will recall that Google sued Mississippi’s populist Attorney General Jim Hood to stop Hood’s investigation into Google’s drug habits.

More on this to come, but the short history of the case is that Hood served a request for documents on Google consisting of a series of questions about Google’s business practices in furtherance of Hood’s investigation into a number of issues, mostly whether Google had violated the nonprosecution agreement Google entered into with the Criminal Division of the U.S. Department of Justice that allowed Google to pay $500,000,000 to avoid being prosecuted–and having its senior executives including Larry Page prosecuted–for violating the Controlled Substances Act.

Hood’s concern was that Google not only violated the terms of the nonprosecution agreement but also may have violated a variety of Mississippi consumer protection laws for advertising illegal drugs in Mississippi.

Let’s be clear–people die from buying illegal drugs online. That’s why we have the Ryan Haight Act carried by Senator Diane Feinstein–a senator from California.

The overwhelming majority of the questions in Hood’s request concerned Google’s compliance.  Google promptly sued Hood to stop the investigation.  As luck would have it, the case was heard in federal court before a judge who is apparently Hood’s long time political opponent.  Google was able to delay Hood’s investigation while Hood appealed to the Fifth Circuit, where the case is now.

The AGs summarize the fundamental flaw with Google’s case:

This is a case about the authority of state Attorneys General to exercise one of their fundamental powers: the ability to investigate potential violations of state law. What should be a routine discovery dispute in Mississippi state courts, resolved under established state procedures, has instead evolved into a contrivance for a company doing business in the state of Mississippi to invoke federal jurisdiction by asserting potential affirmative defenses to claims that have never been filed.

Imagine if the tobacco companies had done the same to Hood’s predecessor and mentor former Mississippi Attorney General Mike Moore to avoid what became a multibillion dollar multistate settlement against Big Tobacco?  Remember that one?

So it should be no surprise that forty–count ’em, forty–state Attorneys General filed an amicus brief supporting Hood’s ability to conduct his investigation while affording Google full due process rights to object or otherwise defend itself.  As the forty AGs noted, doing otherwise “would provide a roadmap for any potential wrongdoer subject to a legitimate state law enforcement investigation to attempt to thwart such an inquiry.”  I wonder what the other 10 are thinking?

I know what these guys are thinking?

And remember–smoking doesn’t cause cancer.

Read the brief here.

What are they afraid of: Will Schmidt Take the 5th Again in @agjimhood’s Mississippi Investigation?

February 12, 2015 Comments off

During Eric Schmidt’s Senate antitrust subcommittee hearing in 2011, a strange thing happened–Eric Schmidt refused to answer under oath on the advice of counsel when Senator John Cornyn–formerly of the Texas Supreme Court–asked questions about Google’s then-recent non-prosecution agreement with the U.S. Department of Justice.  While he didn’t give the usual catechism of “taking the 5th” around the answer, he definitely refused to answer on the advice of counsel.  And when you’re testifying before the U.S. Senate, invoking your right to refuse to answer on the advice of counsel pretty much has one meaning.

So it’s not surprising that Google is now trying to block Mississippi Attorney General Jim Hood’s investigation into the self same “plea bargain” that Google struck with the Criminal Division of the U.S. Department of Justice for which Google paid $500,000,000 of the stockholders money and for which Google is currently being sued by its stockholders.

There’s something about that agreement that Google really, really, really doesn’t want to discuss.

Did Schmidt Take the 5th?

You can feel pretty confident that it would not be Googley for Eric Schmidt to actually recite the magic words of invoking his right to protection from self-incrimination under the 5th Amendment of the U.S. Constitution.  And you can also feel pretty confident that Google would have tried and failed to reach an agreement with subcommittee staff to keep out any questions about the $500 million criminal penalties for promoting the sale of illegal drugs that happened while Schmidt was in charge.

It’s also hard to believe that Google lawyers had not prepared Schmidt for the question about his priors–and bear in mind that this was the one area of questioning all day that could have had some immediate criminal law downside for Schmidt and Larry Page, so it is the one line of questioning that probably spooked him.

And having bought his way out of the drugs problem once, he damn sure wasn’t going to be able to do it again with John Cornyn.

This erudite reporting from the Huffington Post sums it up:

SCHMIDT SAYS HE KNEW ABOUT GOOGLE STEERING FOLKS TO ILLEGAL CANADIAN DRUG SITES – News was actually made at [the] hearing. Ten gallon hat tip to Big John Cornyn, who asked Eric Schmidt about the $500 million settlement Google reached with the Justice Department over illegally advertising Canadian prescription drugs to Americans…. ‘Was it the result of oversight or inadvertence or were there some employees in the company that were doing this without your knowledge or…’ asked Cornyn (R-Texas). ‘Certainly not without my knowledge. Again, I have been advised — unfortunately, I’m not allowed to go into any of the details and I apologize, Senator, except to say that we’re very regretful and it was clearly a mistake’ [Schmidt said].”

Yep, advertising dope to kids means only having to say you’re sorry.

This quotation actually came late in Schmidt’s exchange with Senator Cornyn, but includes the money line “Certainly not without my knowledge.”  So did Schmidt the Princeton Man mean what he said complete with double negative–that any actions by employes of the company were certainly taken with his knowledge?  Or did he mean to say such actions certainly were not taken with his knowledge (given that the fine resulted from seven different sting operations, it seems like that would be a lie of the best kind, a provable lie).

In any event, Schmidt began his answers by saying he had very clear advice of counsel (coaching?) that Google’s nonprosecution agreement with the Department of Justice prohibited Schmidt from discussing the case so Cornyn would have to go to the Department of Justice for his answer.  This produced an audible gasp from the audience and whispering of “that’s not true” floated up through the committee room.

Senator Cornyn asked Schmidt where that prohibition was found, was it in the nonprosecution agreement.  Schmidt said yes.  Cornyn then asked Schmidt if rather than not being able to discuss the agreement,  wasn’t it the case that Google could not deny any of Google’s many admissions of bad behavior in the plea agreement–as Cornyn was told by his counsel.  And you can read it yourself.

Which, of course, is spot on–that’s exactly what Google agreed in the non-prosecution agreement.  Not only was there no confidentiality requirement, the $500 million forfeiture and nonprosecution agreement was actually announced to the public at a press conference held on August 25, 2011 by the U.S. Attorney for Rhode Island, the FDA, IRS and FBI and made available on the government’s websitenot confidential at all.

Schmidt said that he would confer with counsel–the only time he did so, I believe–and then said that he’d been advised not to answer any questions about the nonprosecution agreement.  (The conference with Google’s David Drummond took place in front of the CSPAN cameras–maybe that’s why YouTube is all over the Congress now.)

schmidt senate

What Senator Cornyn didn’t say about the nonprosecution agreement was what happens if Google did deny any of the admissions by Google set forth in the agreement.  What happens?  The agreement is then revoked, the government keeps the $500 million and they are then free to indict Google and Google executives–such as Eric Schmidt and Larry Page.

Do you really think that he hadn’t been coached about how to handle the questions?  And that the brain trust came up with the idea to just try to misdirect Cornyn by telling him the agreement was subject to a confidentiality clause like almost everything else in the world having to do with Google?  Surely not–that would be obstruction of…nah, they’d never be that stupid.  They probably just thought Cornyn was another dumb Southern boy.

But imagine what would have happened if Senator Cornyn had not done his homework?  What would have happened if he didn’t know that nonprosecution agreement backwards and forwards?  The world would think that Google could not be questioned about the agreement.  Not because Google chose not to talk about it because it was a horrendous crime, but because well, shucks, you’ll have to talk to DOJ about that we are prohibited from talking about it.

So was Schmidt coached to give that answer to deflect attention?  So he wouldn’t be seen on CSPAN taking the 5th?

Let’s score that exchange Trinity 1, Princeton 0.

Yes, it was all so confused that Schmidt had to file supplemental “answers” for the record to clarify why a Princeton Man was so confused about the contents of a document that kept him from being indicted and for which he paid $500,000,000 of the stockholders money.

But you have to ask yourself what is so sensitive in the four million pages of documents that Google had to produce to that Rhode Island grand jury investigation in the drugs case that Google doesn’t want any of it to come out.  The four million pages of documents that are just waiting patiently to be reviewed by a coalition of state attorneys general.

Probably the same reason they’re trying to block Jim Hood in Mississippi.

Watch the hearing on CSPAN.

Straight Out of Rosedale: Mississippi’s Sudden Interest in Limiting State Lawsuits While Google Sues Attorney General Jim Hood

February 8, 2015 3 comments

You can’t make this stuff up.  It reads like a subplot of a John Grisham novel with that vague warning that it could swing back across the stage as a plot twist in the third act to smash into the ending with a vengeance, carrying streaming guidons reading  “Here am I, the one true ending, send me.”   A single bugle sputtering a few bars of Garry Owen in the darkest gloom of dawn at Vicksburg.  The General, perhaps.

In a strange twist of fate worthy of Robert Johnson at the crossroads, a number of events transpired in recent weeks involving Mississippi State Attorney General Jim Hood who is being sued by Google for having the audacity to investigate a variety of potentially unsavory business practices having to do with sex, drugs and yes, rock and roll.

The timeline on this is that Hood served Google with a subpoena last October 21 asking for documents relating to Google’s business practices–what Google itself does–mostly involving how the company handles human trafficking, advertiser fraud and why the Google stockholder settlement over the $500,000,000 forfeiture Google paid the United States has a section that addresses how Google provides golden parachute terminations for employees convicted of felonies under state and federal law.  And also a few questions regarding the hundreds of millions of DMCA notices that Google receives for copyright infringement.

Then there was the Sony hack, and thanks to North Korea some stolen documents circulated on the Internet including some confidential emails from the MPAA.  You have to live under a rock not to know the rest of those facts.  And–shocker–people in the business of producing movies don’t like Google much.  According to Google, somehow the stolen documents show that MPAA is involved with helping the state develop a case against Google.

Google then sues Hood in federal court in Mississippi and tries to somehow transform Hood’s investigation from a case about Google’s business practices and compliance (with Google’s non-prosecution agreement with the Criminal Division of the Department of Justice) into a case about infringing materials on Google’s various platforms–all essentially based on the documents stolen courtesy of North Korea.  And Google wants you to believe that somehow there’s a SOPA angle about all this–a stretch that didn’t impress many people not on the Google payroll.  As Congressman Issa said, if there’s a scandal here at all, it’s that years after SOPA, there’s still the same problem that SOPA was trying to solve however inartfully.

Google is trying to get an injunction to stop Hood’s investigation.  Hood’s brought no case as yet and has only asked Google to respond to his subpoena.  Google probably has dozens of open subpoenas around the world, so this is nothing new.  Google could very easily respond to the subpoena and reject the lines of questioning its lawyers think are inappropriate or wrong–essentially the same work that went into asking for an injunction.  But they wanted a court–a federal judge–to order a state law enforcement officer to stop the investigation into violations of state law.

Of course, the federal judge denied Google’s request but asked the parties to brief their positions, which they did.  And here’s where it gets weird.

First, Google filed its response to Hood and a handful of the trade associations and lobby shops the company funds filed “friend of the court” responses as well.  This on February 2.  Vox Indie has a great post describing the various funding relationships between Google and the “amici”.  (UPDATE:  Mike Godwin wrote an op-ed in the Clarion-Ledger–Godwin not only works of the R Street Institute (funded by Google) but was formerly at Public Knowledge (funded by Google), the Center for Democracy and Technology (funded by Google) and the Electronic Frontier Foundation (funded by Google).  He also attended Lamar High School in Houston, go Redskins!)

On January 19, a Mississippi state legislator introduced Mississippi House Bill 1201–legislation that would limit the Mississippi attorney general’s ability to sue on behalf of the state for any reason.  Such as a potential lawsuit against or criminal prosecution of Google.

On February 3, Hood was in Washington, DC to announce a settlement of claims against Standard & Poors for doing something that sounded a lot like cooking the credit ratings of companies that were involved in the 2008 mortgage scandals.  Hood was a leader in the several states in the suit against S&P.

According to the Associated Press:

Attorney General Jim Hood says in a news release that Mississippi sued S&P in 2011, joining with Connecticut, the first State to sue in 2010. By 2013, the Justice Department and 17 other states filed similar lawsuits against S&P.

Standard & Poor’s is paying about $1.38 billion in the settlement announced Tuesday over ratings issued from 2004 through 2007.

Hood says the credit rating agencies were just as culpable as the investment banks in causing the financial crisis. Hood says the credit rating agencies held themselves out to be objective and independent.

Oh, and how much was the settlement again?  That’s $1.38 billion with a B.  But let’s limit the state AG’s ability to go after bad guys.

What happened with Mississippi House Bill 1201?  It passed out of committee:

A House judiciary committee passed a bill today that would require the state attorney general to gain approval from an oversight committee of the governor, lieutenant governor and secretary of state to file any lawsuit on behalf of the state for more than $250,000.

State Rep. Ed Blackmon Jr., a member of the House Judiciary A Committee, called the measure partisan politics. He voted against it.

House Bill 1201 was filed by the chairman of the committee, state Rep. Mark Baker, R-Brandon, who has been discussed as a potential candidate for attorney general this year.  [Mr. Baker was also the Republican Leader of the Mississippi House Republican Conference from 2008 to 2012 according to his official biography.]

State Attorney General Jim Hood, the lone statewide Democratic official, has been criticized by some Republicans for hiring outside attorneys to represent the state in litigation, but at the same time, through litigation, Hood’s office is responsible for bringing hundreds of million dollars into the state treasury.

And then on February 5, Bill 1201 failed to pass the Mississippi House:

Mississippi House members are rejecting new restrictions against Attorney General Jim Hood’s ability to file lawsuits or hire outside lawyers.

The House voted 66-49 Wednesday to reject a House Bill 1201, which would require the governor, lieutenant governor and secretary of state to approve the attorney general’s filing of any lawsuit in which the state could win more than $250,000. House Judiciary A Committee Chairman Mark Baker, R-Brandon, could bring the bill back up for more debate….Baker said Hood’s unfettered ability to bring lawsuits is improperly setting state policy, negatively affecting Mississippi, and robbing those who are sued.

Hood and supporters say House Bill 1201 would put unconstitutional restrictions on the attorney general’s power….

“This may be the most rancid, politically motivated bill I’ve seen before this Legislature,” said Rep. Steve Holland, D-Plantersville.  

Lawsuits by attorneys general have been a long-festering issue in Mississippi politics, running back to when Hood’s predecessor, Democratic Attorney General Mike Moore, sued the tobacco industry in the mid-1990s, arousing the ire of Republican Gov. Kirk Fordice even as Moore won millions for the state. [$4.1 billion, actually.]

Republican Gov. Haley Barbour — who was a tobacco lobbyist in Washington during Mississippi’s lawsuit against the industry — used the tobacco money to help prop up the state budget during the recession. The payments from the tobacco lawsuit settlement are still being spent under the current Republican governor, Phil Bryant.

So all in all, a pretty good week for Jim Hood.  Bizarre, but good in the end.  This is particularly true when you consider that there are potentially dozens of additional state attorneys general who are also investigating Google and also that Mike Moore is evidently advising Hood.  This would make sense if, like the tobacco litigation and the S&P litigation, Mississippi is joining with other states to pursue Google. Moore was the first state attorney general to sue the tobacco companies, resulting in a $236 billion settlement, of which $4.1 billion went to Mississippi.  (Google is no stranger to multistate litigation–it settled a privacy case with 37 states in 2013.)  Oh, and Mike Moore got a part in a Hollywood movie.

Don’t watch The Insider on a dark and stormy night.  Let’s just say it’s not The Internship.

As Andrew Orlowski wrote in The Register:

Google’s success in “assassinating” a democratically-elected legal opponent last week raises troubling questions about corporate power and accountability. The feisty attorney for the USA’s poorest state is now trying to make peace, after being on the receiving end of a highly unusual lawsuit from Google.

Even if you will have no truck with the Hollywood lobbying machine, you should know the facts. A global corporation which is expected to bank $60bn in revenue this year and which is worth $382bn, has silenced an elected prosecutor.

Google’s income is 30 times that of the General Fund in Mississippi; its market valuation is four times the entire state’s GDP. What did Jim Hood do to make himself Google’s enemy?

Based on Hood’s response to Google’s attempt to stop his investigation, I’m not so sure that he’s giving into “rancid” tactics.  But ask yourself this:  If this were Big Tobacco going after former Mississippi Attorney General Mike Moore, how would you feel about Google’s tactic?

Or Enron?

Or Drexel Burnham Lambert?

So why should Google be special?

UPDATE:  Judge Wingate–evidently Hood’s long-time political enemy–ruled against Hood.  The case is currently on appeal to the U.S. 5th Circuit Court of Appeals.  This should not prevent Hood from pursuing state law claims against Google or anyone else.

Why Does Google Drug Stockholder Settlement Cover Golden Parachutes for Felonious Employees?

August 18, 2014 Comments off

Google recently filed a tentative settlement with its stockholders over the $500,000,000 of the company’s money that Google’s executive team authorized be spent to keep from being indicted by a Rhode Island grand jury.  (I invite you to read the sordid history in the settlement and also the story of the Google sting operation in the Nonprosecution Agreement between Google and the United States,)

The settlement is full of the kind of stuff you’d expect to see in a settlement of this kind:  Google refuses to admit liability, but agrees to spend even more of the stockholder’s money to stop itself before it sins again.  But then out of the blue comes this section:

2.7 Criminal Activity Reporting

Google’s General Counsel shall be responsible for reviewing every situation in which a  Google employee is convicted of a felony under U.S. federal or state criminal statutes in connection with his employment by Google and for reporting to the Board (or an appropriate committee of the Board) with respect to that violation. Presumptively, any employee convicted of a felony under a U.S. federal or state criminal statute in connection with his employment by Google shall be terminated for cause and receive no severance payments in connection with the termination. If the General Counsel determines that such termination is not warranted, he shall so recommend to the Board (or an appropriate committee of the Board), which will act upon his recommendation in its discretion.

Notice that there’s not one word in this section dealing with drugs, drug advertising or the like.

Why would this language need to appear in what will eventually be a court order requiring Google to essentially deny a severance package to Google employees who are terminated for being convicted of a felony under either a federal or state statute.  When would a publicly traded company ever pay a severance package to an employee terminated for cause?  (And being convicted of a felony is almost invariably grounds for termination for cause whether or not it relates to your employment.)

Note that this language appears to be preventative and forward looking in nature as is the rest of the proposed settlement (assuming that all of the settlement has been made public, a big assumption when it comes to Google).  So it appears that during their discovery the shareholders found some information that led them to think this provision of their settlement agreement would have been required.

That would lead me to think that the behavior being proscribed had occurred.  Meaning that somebody was convicted of a felony, was fired, but was given a severance package.

I would also venture a guess that this wasn’t something like two weeks salary–that wouldn’t rise to the level of a court order applying to all Google employees and Google’s most senior management.  What would rise to the level of a court order would be something like a two or three year salary payout, accelerated vesting of stock options, a flat payment of at least six or seven figures, or some combination.   And if you are talking about accelerated vesting of Google stock options, you can get into the million dollar range very quickly.

Now what might motivate a company like Google to make such a payment–given that corporate lawyers are often looking for a basis for termination for cause for the very purpose of getting out of any payout for a termination without cause that can trigger all of the above.  Also known as a “golden parachute.”

Remember–this paragraph deals with employees who have actually been convicted of felony violations of U.S. law, and it might be stretched to include employees who were convicted in other countries of what would have been a felony under U.S. state or federal law.

There’s another reason a public company like Google might give severance payments of a size to warrant this type of response:  Hush money.

Whatever it is, this paragraph didn’t come out of nowhere.

Which leads one to think that there is something putrefying in Mountain View.  Shareholders have a right to know what it is.

The Fed Ex Drug Indictment is Son of Google Drugs: Will Anyone Give a Body Count?

July 29, 2014 Comments off

In 2011, Google paid a $500,000,000 fine to the U.S. Government for violating the Controlled Substances Act by promoting and to a degree knowingly facilitating the sale of prescription drugs online without a prescription.  The company agreed to sign a nonprosecution agreement with the U.S. Government following a long grand jury investigation in Rhode Island in which Google produced over 4,000,000 documents.  We don’t know the details, but based on some news reports it seems hard to believe that top Google executives did not appear before the grand jury.

When Eric Schmidt testified at the Senate Antitrust Subcommittee on CSPAN, the issue was so sensitive that he refused to answer questions about the nonprosecution agreement posed by Senator John Cornyn.  (A Google tactic made even more bizarre because the nonprosecution agreement itself is a public document–read it here.)  Schmidt later claimed to have been confused by Senator Cornyn’s quesitons.  Right.  Sure looked to many people like Schmidt took the 5th on CSPAN.  Whether Google is out of the drugs business is something of an open question right now, particularly if you ask Mississippi Attorney General Jim Hood and some other state attorneys general.

Of course connecting suppliers and users is only part of the online market place for dope.  FedEx is now indicted for being the next leg of the delivery network for online pharmacies.  FedEx, of course, denies it in a statement that boils down to the kind of denial of red flag knowledge that we hear every day from Google’s massive piracy operation.  Of course, it’s not like the cops haven’t heard this one before.   Just like Google, the FedEx indictment looks like the product of major sting operations run against FedEx over a long period of time.

The most interesting part of this is that Google was allowed to buy their way out of an indictment, perhaps a testimonial for spending big bucks on a Washington lobby shop run by DC insiders.  Remember, Google was being celebrated at the White House for all the good things they were doing for online drug safety at the very moment the government was negotiating the nonprosecution agreement.  FedEx, however, got indicted.

The government’s story about FedEx is quite simple and in its own way is very similar to Google’s:  It’s about money.  In an excellent piece about the FedEx story in the Daily Beast, Abby Haglage writes:

In 2004, the DEA estimated that FedEx had 200 registered online pharmacies. By 2010, it had more than 600. As early as the mid-2000s, the indictment reveals, employees in multiple states had allegedly expressed concerns to management about the dangers of delivering addictive pills. According to the investigation, deliverymen and women reported being “stopped on the road by Internet pharmacy customers demanding packages of pills” and “[being] threatened if they insisted on delivering a package to the address instead of giving the package to the customer who demanded it.” Others claimed that customers were “doctor shopping” and expressed concern that some of them had “overdosed and died.”

And this is the story about online pharmacies that has yet to be told in both cases.  It is simply impossible to believe that there have not been deaths, possibly many deaths, from this syndicate.  The leadership in these public companies like Google and FedEx are accused of similar acts:  Knowingly instructing their employees to participate in a criminal enterprise for profit.  To my knowledge, no one has investigated any deaths from this enterprise except for Senators Diane Feinstein and Jeff Sessions.

Right about the time Google was being investigated by a federal law enforcement task force, Senator Diane Feinstein introduced Ryan’s Bill in 2008 named in honor of Ryan Haight, co-sponsored with Senator Jeff Sessions.  The bill got the full backing of President George W. Bush who said:

Unfortunately, many young Americans do not understand how dangerous abusing medication can be. And in recent years, the number of Americans who have died from prescription drug overdoses has increased.

One of the factors behind this trend is the growing availability of highly addictive prescription drugs online. The Internet has brought about tremendous benefits for those who cannot easily get to a pharmacy in person. However, it has also created an opportunity for unscrupulous doctors and pharmacists to profit from addiction.

One victim of such a doctor was Ryan Haight. The young man from California was only 18 when he overdosed on pain killers that were illegally prescribed over the Internet. With only a few clicks of the mouse, Ryan was able to get a prescription from a doctor he had never met and have the pills sent to his front door. The doctor who wrote Ryan’s prescription had previously served time in prison for illegally dispensing controlled substances.

The government, of course, has to make it’s case against FedEx.  Based on the facts alleged in the FedEx indictment, it looks like there were a lot of FedEx employees who were in on it and it went quite high up the chain–just like the Google case.  The U.S. Attorney for Rhode Island told the Wall Street Journal:

“Larry Page knew what was going on,” Peter Neronha, the Rhode Island U.S. Attorney who led the probe, said in an interview. “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.”

The Daily Beast also reports based on the FedEx indictment:

In a move that the DEA and FDA suggest shows both knowledge of the illicit online pharmacy industry and awareness of its potential for boom and bust, FedEx established an “Online Pharmacy Credit Policy.” This required all online pharmacies to provide FedEx with a security deposit, bank letter of credit, and to be subjected to “limited credit terms.”

FedEx (meaning somebody in a position to establish FedEx policies) made sure that FedEx had a good chance of collecting their fees even if the DEA shut down an online pharmacy operation.  I would imagine that FedEx executives involved in that decision making are a fairly narrow bunch of names.

Instead of targeting the companies, FedEx re-structured the delivery plan, according to investigators. A senior vice president of security reportedly launched an initiative that allowed delivery people to leave packages from “problematic shippers” at a station where the consumer could pick them up. But shielding the employees from potentially dangerous encounters didn’t change the nature of the business, the federal agencies say. FedEx was still willingly aiding in the distribution of controlled substances without the need for a prescription from a qualified physician. Over the course of the nine-year probe, FDA and DEA agents claim they repeatedly ordered prescriptions—varying from weight-loss medication to erectile dysfunction pills—using an online questionnaire only.

In other words, FedEx is accused of engaging in exactly the behavior that Ryan’s Bill was designed to stop.  And the government was involved in a sting against FedEx that overlapped with the Rhode Island grand jury’s investigation of FedEx.

The government is looking for $1.6 billion from FedEx–3x what it got from Google for the other part of the racket.  Since both are interdependent on each other, it seems that the government has gotten used to the idea that when corporations go bad, don’t be shy about the money.

And it is, in the end, just about the money.

Speaking of money, the good news for the U.S. Attorney for the Northern District of California is that there’s a good chance that most of whatever fine FedEx ends up paying will stay in her jurisdiction.  That will help law enforcement level the playing field against the next target in this area.   That may help cover the cost of investigating the deaths that have occurred from this unholy alliance among pharmacies, Google and shippers.

In a press release, Philip J. Walsky, Acting Director, FDA’s Office of Criminal Investigations summed it up:

Illegal Internet pharmacies rely on illicit Internet shipping and distribution practices. Without intermediaries, the online pharmacies that sell counterfeit and other illegal drugs are limited in the harm they can do to consumers.  The FDA is hopeful that today’s action will continue to reinforce the message that the public’s health takes priority over a company’s profits.

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