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R.I., US agencies to split $500m in Google case

Company aided Canada drug sales

Kirkland, Wash.

AP

The Google campus in Kirkland, Wash.

Rhode Island will receive nearly half of $500 million Google Inc. agreed to forfeit last year for helping online Canadian pharmacies illegally sell prescription drugs to US consumers, Peter F. Neronha, the state’s US attorney, revealed on Monday.

Approximately $230 million will be paid to Rhode Island state and local law enforcement agencies that helped to investigate Google’s role in the placement of ads from the online pharmacies. The rest of the Google settlement will go to federal authorities involved in the investigation, including the Food and Drug Administration and the Internal Revenue Service, and to the Department of Justice’s Assets Forfeiture Fund, which will receive $170 million. The fund is a national account used to pay expenses associated with operations such as property seizure or disposal.

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“As we’ve said, we take responsibility for our actions,’’ said Diana Adair, a Google spokeswoman. “With hindsight, we shouldn’t have allowed these ads on Google in the first place.’’

At a press conference in Providence on Monday, Neronha and Kathleen Martin-Weis, acting director of the Food and Drug Administration’s Office of Criminal Investigations, said distribution of the funds was based on the time and resources each agency provided to the investigation. “It is my hope and expectation that these monies will be used for the benefit of all Rhode Islanders, by enhancing our overall ability to fight crime and keeping our residents safe,’’ Neronha said in a statement.

Although the ads in question appeared on Web browsers throughout the United States, Rhode Island authorities are the only state or local agencies receiving any of the Google money. The state’s $230 million share, 46 percent of the settlement, “could be thought of as a recognition of their role in pursuing this long, complex case,’’ said Edward Naughton, a business litigator with Boston law firm Brown Rudnick LLP.

The $170 million payment to the Justice Department fund “represents the money that is going back to the US people at large, because it is a national account that will be used to pay for future investigations and forfeiture operations,’’ Naughton said.

In Rhode Island, the East Providence and North Providence police departments will each get $60 million; another $60 million will go to the Rhode Island attorney general’s office; State Police will receive $45 million; and the Rhode Island National Guard will get $5 million.

Of the shares for four federal agencies that worked on the investigation, $40 million will go to the US Postal Service; $35 million to the Internal Revenue Service; $15 million to the Secret Service; and $10 million to Immigration and Customs Enforcement (Homeland Security Investigations).

Rhode Island Attorney General Peter F. Kilmartin said he has thought about how his office will use the $60 million.

“When I came into office 14 months ago, I identified information technology as an area that sorely needed upgrading,’’ he said. “These dollars will help us address that. We need to improve the technology tools this office is using to manage cases and present evidence.’’

Kilmartin said his office would be buying computers and software to help with courtroom presentations, and that he is considering an upgrade to the payroll system, which is still managed on paper.

The Google investigation was launched after the 2008 arrest in Mexico of David Whitaker, the owner of a Rhode Island company who had fled a financial fraud investigation in that state. Under questioning, Whitaker revealed that while hiding in Mexico, he had set up websites that purported to represent pharmacies in Canada, and Google’s AdWords advertising system played a major role in helping him succeed. He said the Google employees knew what he was doing, and that it was illegal, but that they helped him nevertheless.

Google knew as early as 2003 that online Canadian pharmacies that were reaching US consumers through the search giant’s AdWords advertising program were illegally shipping prescription drugs into this country, the investigation revealed. Although Google took steps to block pharmacies in other countries from using AdWords to advertise in the United States, it continued to accept ads from Canadian pharmacies, and even provided customer support to help place their ads and improve their websites.

Benjamin G. Edelman, an assistant professor of business administration at the Harvard Business School who has researched online advertising fraud, wrote in an e-mail that the massive forfeiture sends a message to Google.

“Now, finally, the DOJ [Department of Justice] has appropriately held Google accountable for a portion of the intentionally deceptive and unlawful ads that have yielded, by all indications, literally billions of dollars of revenue,’’ Edelman wrote.

D.C. Denison can be reached at denison@globe.com.
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