The U.S. government had a convicted federal prisoner pose as a businessman running illegal online pharmacies as part of an investigation into Google’s advertising practices.Google ended up paying $500 million to settle the investigation.
The Wall Street Journal talked to David Whitaker, a convicted fraudster and federal prisoner who helped the Department of Justice in its investigation, as well as federal prosecutors in the case.
Federal prosecutor Peter Nerohna claims that Google execs including Larry Page knew about the illegal ads but did nothing to stop them. Sources also told the Journal that former Google exec Sheryl Sandberg (who now is the COO at Facebook) raised concerns about the ads.
The sting itself is pretty remarkable.
Whitaker says he set up a fake Mexican online pharmacy selling steroids and human growth hormone. Google rejected it at first, but Whitaker claims that Google’s ad executives then worked with him to find a way around the rules. Whitaker says he paid Google’s advertising fees with a credit card provided by the feds.
Later, federal agents apparently set up other fake sites selling prescription narcotics, Prozac, and Valium without prescriptions, and bought Google ads for all of them. On one ad, Google ad execs allowed the feds to add the line “no prescription needed,” according to the Journal’s report.
Most damning of all, Whitaker told the Journal that he made phone calls in which he walked through the illegal parts of his fake Web sites with Google execs, and once told them that one of his clients wanted to become the biggest steroid dealer in the U.S. The calls were recorded.
Eventually, so many orders started coming in for the illegal drugs that the government changed the sites so that users would have to pay a membership fee before receiving them — that stopped orders cold.
The government presented the evidence to Google in 2009 and served grand jury subpoenas for emails and other documents. Google settled two years later — otherwise, emails proving that top execs knew about the illegal ads would probably have come out at trial, reports the Journal.
Read the whole amazing story here.