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@andreworlowski: Nothing says freedom like getting away with it: Google quietly takes gag off Mississippi AG after wrecking ads probe

July 15, 2016 Comments off

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

From Long Long Time, by Guy Forsyth

Andrew Orlowski reports in The Register:

Google has, without fanfare, dropped its legal action that muzzled an investigation into the ad giant’s conduct by the State of Mississippi.

The state’s elected attorney general, Democrat Jim Hood, has taken on Wall Street, the tobacco industry and the KKK, but even he must have been surprised by Google’s 44-page restraining order [PDF] in response to a wide-ranging 79-page subpoena [PDF] he filed against the corporation in 2014….

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The subpoena into Google’s business practices focussed on whether the company was abiding by the terms of a 2012 non-prosecution agreement it signed with the US government’s Food and Drug Administration and Rhode Island State after a multi-agency sting operation.

Google agreed to forfeit $500m as part of that deal, which raised eyebrows for several reasons – one being that $230m of the forfeiture found its way to Rhode Island.

Hood pointed out that the four-year sting operation run against Google by a combination of federal agencies before a federal grand jury in Rhode Island showed that Google and its senior management team right up to Google’s CEO Larry Page was complicit in violating the Controlled Substances Act to the point of helping the bad guys get around Google’s own filters.  Google paid a $500,000,000 forfeiture for those drug violations for advertising the sale of prescription drugs–not for what the advertisers did, but for what Google did.

Sorting through more than four million documents [that Hood was trying to get released by his subpoena], prosecutors found internal emails and documents that, they say, show Mr. Page was aware of the allegedly illicit ad sales. Under this week’s $500 million settlement, those emails won’t be released, avoiding the possibility of disclosure at trial.

“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.”  [Which is why Hood wanted to get at those documents.]

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According to Google’s lawyer Boris Feldman speaking in open court on the record that the Department of Justice apologized to Google for the statement by Mr. Neronha (Transcript of hearing with Feldman statement at pp 11-12):

“The U.S. attorney in Rhode Island went off the reservation and gave a long interview about all the evidence 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.” (emphasis mine)

The rumor is that the apology was engineered by Amazon board member Jamie Gorelick, the former Clinton Deputy Attorney General who preceded Eric Holder (later Obama’s Attorney General who was in office when the apology was tendered).

In another Googley twist, Ms. Gorelick’s former protégé (special counsel to the deputy attorney general), Beth Wilkinson, was brought in to oversee the Federal Trade Commission’s antitrust non-investigation investigation into Google for which it is now being prosecuted in Europe.  Why?  Because they just don’t have enough career prosecutors in the FTC who would let Google off the hook, I suppose.  But I digress.

Ms. Gorelick represented Google in the negotiation of the deal with Holder that let Google executives keep the drug case away from a grand jury and use $500,000,000 of the shareholders’ money to pay for their own violations of law for which Google’s board and executive team was sued by stockholders (In re Google Inc. Shareholder Derivative Litigation).

Hood also asked about a curious section of the settlement of the shareholder lawsuit:

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So Google demonstrated again that the only government that seems to be able to control them is…maybe…the European Commission.

The Class Action Scam Continues with Facebook Sponsored Stories

September 22, 2013 Comments off

Here’s the way it looks like it works:  Google or Facebook overreach in a way that allows them to be sued for potentially billions in a class action that has yet to be filed, but could be.  Friendly lawyers come forward and offer a deal–we represent the class, we will do a settlement that pays the lawyers a bunch of money and eliminates the company’s liability for everyone except those who affirmatively opt out of the class.  And then the company gets to siphon cash into their favorite lobbying groups and a handful of real foundations thrown in for window dressing through a loophole called “cy pres“.

Lots of cash.

And, oh, yes–pays the class as close to nothing as they can get away with.

Three big settlements in the last few years that take on this appearance including the cy pres loophole are the Google Buzz settlement, the recently concluded Facebook “Sponsored Stories” settlement and the Facebook “Beacon” settlement.  MTP readers will recall we’ve written about this before as has Andrew Orlowski in The Register and Roger Parloff in Fortune.  Facebook has an earlier rather dubious class action regarding its controversial “Beacon” advertising tool that was the subject of excellent reporting by Adam Liptak in the New York Times.  An appeal from the grotesque Beacon class action settlement is on appeal to the U.S. Supreme Court and we should know any minute now whether the SCOTUS will hear the appeal.

As Adam Liptak explains in the New York Times:

Class-action lawyers call the diversion of settlement money from victims to other uses “cy pres.” The fancy-sounding term is derived from a French legal expression, “cy pres comme possible,” or “as near as possible.”

The Beacon Dissent and Appeal

The Beacon class action against Facebook featured a highly innovative technique:  Give the class members nothing and set up a toothless watchdog group foundation controlled by Facebook (which included tech journalist Larry Magid as a board member–his name also appears in a different class action against Facebook for Sponsored Stories because his ConnectSafely.org group gets money from Facebook in another innovative cy pres loophole settlement.  We tried contacting Magid for a comment a couple times over the last year, but got no reply.)

As Mr. Liptak tells us:

The settlement’s central innovation [in the Beacon settlement] was to cut [the class members] out of the deal.

The class members would get nothing. The plaintiffs’ lawyers would get about $2.3 million. Facebook would make a roughly $6.5 million payment — to a new foundation it would partly control.

The appeals court upheld the settlement last year by a 2-to-1 vote, with the majority saying it was “fair, adequate and free from collusion”….

“[The class members] do not get one cent,” Judge Andrew J. Kleinfeld wrote in dissent. “They do not even get an injunction against Facebook doing exactly the same thing to them again.”

In exchange for nothing, the plaintiffs gave up their right to sue Facebook and its partners in [the Beacon] program….The program has been shuttered, but its legal legacy lives on.

“This settlement perverts the class action into a device for depriving victims of remedies for wrongs,” Judge Kleinfeld wrote, “while enriching both the wrongdoers and the lawyers purporting to represent the class.”

You get the idea.

The Beacon case (Marek v. Lane) gives the U.S. Supreme Court the chance to review this cy pres loophole that Silicon Valley uses to funnel money to its lobbying and litigation machine outside of disclosure requirements.  (The EFF, for example, is a 501(c)(3) tax exempt organization–if the SCOTUS was feeling ambitious, a little choice dicta calling into question the propriety of allowing the EFF to function at the taxpayers expense could be quite helpful.)

Constitutional Issues

We make fun of these absurd cases that are mostly thinly disguised payoffs to “advocates” for the company line, but there are serious Constitutional issues involved as well.  Cato Institute has filed an amicus brief in the Beacon case that we hope will be heard by the SCOTUS.  This excerpt from Cato sums up the issues pretty well:

Cato filed an amicus brief arguing that the use of cy pres awards in class actions violates the Fifth Amendment’s Due Process Clause and the First Amendment’s Free Speech Clause. Specifically, due process requires — at a minimum — an opportunity for an absent plaintiff to remove himself, or “opt out,” from the class. Class members have little incentive or opportunity to learn of the existence of a class action in which they may have a legal interest, while class counsel is able to make settlement agreements that are unencumbered by an informed and participating class. In addition, when a court approves a cy pres award as part of a class action settlement, it forces class members to endorse certain ideas, compelling speech in violation of the First Amendment. When Facebook receives money — essentially from itself — to create a privacy-oriented charity, the victim class members surrender the value of their legal claims in support of a charity controlled by the defendant. Class members are left uncompensated, while Facebook is shielded from any future claims of liability.

How do you think Google and Facebook respond?  After all, we’re just talking about the Constitution, the founding document of a mere nation state.  Should something as trivial as the Constitution hold back permissionless innovation?  That might break the Internet.

They’re Not All Bad

Fans of class actions will be pleased to know that there are judges out there who are not fooled by these scams (or who don’t approve payments to their own law schools, like Judge Ware did in the Google Buzz settlement when he approved a $500,000 payment to Santa Clara University–right before he took early retirement to lecture at…Santa Clara University’s law school).

In the Custom LED v. eBay class action, another Northern District of California class action against a tech company, Judge Jon Tigar recently denied approval to the class settlement and highlighted  “obvious deficiencies” in the deal for the class that benefited eBay including that the proposed cy pres award recipients, the National Cyber-Forensics & Training Alliance and the National Consumer Law Center did not have “a nexus to the putative class members and their claims. Accordingly, the Court cannot conclude that the parties’ proposed cy pres award complies with the Ninth Circuit’s standard for such distributions didn’t have a sufficient nexus to the class members and their claims.”

So at least there’s some hope in San Jose federal courts for class members.

Facebook Says, “Me, too!”

Just so you get the idea, here’s a chart that compares the Buzz and Sponsored Stories lucky winners.  Not that there’s a pattern there or anything:

Organization

Sponsored Stories Settlement

Google Buzz Settlement

American Civil Liberties Union $    700,000
Berkley Center for Law and Technology $  300,000 $    500,000
Samuelson Law, Technology and Public Policy Clinic $    200,000
Berkman Center $  300,000 $    500,000
Brookings Insitution $    165,000
Carnegie Mellon Privacy & Security Lab $    350,00
Center for Democracy & Technology $   500,000 $    500,000
Electronic Frontier Foundation $   500,000 $ 1,000,000
MacArthur Foundation $   500,000
Indiana University $    300,000
Stanford Center for Internet and Society (founded by Lessig with $2,000,000 from Google) $   300,000 $    500,000
YMCA of Greater Long Beach $    300,000
Electronic Privacy Information Center $    500,000
Santa Clara University $  300,000 $    500,000
Youth Radio $      50,000
Joan Ganz Cooney Center $  500,000
NYU Information Law Institute $  300,000
Campaign for Commercial Free Childhood $  300,000
Consumers Federation of America $  300,000
Rose Foundation $  300,000
ConnectSafely.org (Larry Magid/Facebook) $  300,000
WiredSafety.org $  300,000

UPDATED: Looking to the East for The Review that Counts: Brit Photographers ask for Judicial Ruling on Legality of “Google Review’s” Star Chamber of One

January 15, 2013 Comments off

MTP readers will remember Brad Holland’s excellent article documenting the struggle by artists against the “orphan works” legislation (“Orphan Works and the War on Artists“).  The British have their own version of that legislation pending in the Parliament, the “Enterprise and Regulatory Reform Bill” which has in it the hated Clause 68 among others that would weaken creator rights. The bill is the legislative version of the controversial “Hargreaves Review” also known as the “Google Review” as it is the legislative wet dream of the anti-artist groups.  In a procedural move called a Letter Before Claim, major news organizations have challenged the Google backed Enterprise and Regulatory Reform Bill–which may present a constitutional challenge to the way that the bill converts what should be legislative rulings on the property rights of artists into the decision of a Star Chamber of One.

According to the British Journal of Photography:

A consortium of news agencies that include Associated Press, Getty Images,  Reuters, British Pathé, Press Association and the Federation of Commercial and  Audiovisual Libraries has threatened to launch a Judicial Review into the  government’s plans to change the UK’s copyright laws.

The world’s largest news agencies have delivered a Letter Before Claim to the  UK’s business secretary Vince Cable, in what is described as the first step in  the process of initiating a Judicial Review – a formal legal challenge to  governmental planned legislation.

Andrew Orlowski writes in The Register:

The requested judge-led review hinges on the fact that the draft law implements copyright as a property right. The UK constitution trusts our elected Parliament, not a lone senior minister, to provide protection over citizens’ property – making Parliament the citizens’ guardian against seizure. However, the ERRB clauses allow a government figure to make startling changes to property rights on the hoof.

Supporters of Prof Hargreaves’ copyright review, including Google – which privately lobbied for weakening UK copyright and helped foment the planned overhaul – may now be entitled question the clumsy implementation strategy of the bureaucrats at the UK’s Intellectual Property Office (IPO), which masterminded the changes.

The IPO is an agency in the government’s Department for Business, Innovation and Skills, although critics refer to it as the office of “Intellectual Property Obliteration”. It has long sought to weaken copyright protection: it raced ahead of the Hargreaves timetable by inserting free-standing clauses on orphan works and extended collective licensing (which were not even mentioned in the Hargreaves key bullet points) into the general-purpose ERRB.

These amendments were proposed before the government had announced what it would do about Prof Hargreaves’ findings. Now rather than getting half a loaf, the agency’s top brass may not even end up with a bun.

The IPO believes copyright is a regulatory impediment, rather than a property right, and theory-based academics share its view. But this is a Humpty Dumpty approach to semantics. What matters is what copyright means in law, not what Humpty chooses it to mean, “neither more nor less”.

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