Mississippi Attorney General Jim Hood is conducting what looks to be a criminal investigation into Google’s business practices including whether Google complied with a 2011 “non prosecution agreement” with the U.S. Department of Justice that required Google to pay $500,000,000 of the stockholders money to keep their senior management team from being prosecuted for violating the Controlled Substances Act.
Yes, that’s right. A $500,000,000 fine. Of course you read about that in news far and wide, right? Not really. The only mainstream media outlets that covered it were pretty much the Wall Street Journal and Wired. More about that later.
Google has sued Attorney General Hood to try to keep him from investigating potential crimes at Google, and David was interviewed about that case yesterday in the Washington Internet Daily, so we thought we’d give you some background.
Google’s Plea Bargain with the United States
Of the many things that are interesting about that faux plea bargain let us focus on three. First, it was the result of a four year sting operation conducted by the Food & Drug Administration, the IRS, the FBI and the Justice Department. Next, the U.S. Attorney for Rhode Island collected four million documents–that’s right–four million documents that the U.S. Attorney told the Wall Street Journal clearly implicated Google’s senior management including…wait for it…Larry Page.
Finally, the acts for which Google was to be prosecuted in federal court were the acts of Google employees acting as individuals and clearly not as part of their job descriptions. (Unless promoting the sale of advertising for illegal drugs was in their job description in which case there’s much, much bigger problems.)
What that means is that when Google paid a $500,000,000 forfeiture–which was both Google’s profit and the sums Google paid to the illegal pharmacies as a revenue share that Google agreed to pay to keep from being indicted–that money was really not something that was Google’s fault as Google the corporation. That fine should have been paid by the employees themselves.
That would, of course, have required identifying the employees which evidently included Larry Page.
One of the conditions of the faux plea bargain was that Google would not violate the Controlled Substances Act for a while. And if they did–if Google violated their probation–the deal was off and the DOJ would pick up right where they left off.
That’s a big hammer. And that’s part of what Mississippi Attorney General Hood is investigating.
Oh and there’s one other thing about the DOJ plea deal with Google. It had nothing to do with copyright. It had nothing to do with any conduct that’s in any safe harbor, Communications Decency Act, DMCA or otherwise. It was GOOGLE’s own conduct at the highest levels of that depraved organization. And if you read Hood’s subpoena on Google, it is entirely addressing Google’s OWN conduct, no issues of third party liability.
The Shareholder Suits
You would think that Google’s board would have said, hold on here, pay that $500,000,000 with your own money, Larry. Right? Another fine mess you got us in. Because a company’s board of directors is supposed to protect the company’s interests, the shareholders interests. It’s inconceivable that the $500,000,000 payment was made without the board’s approval.
But whose money is that? Clearly not the money of the executives who caused the problem. It’s not the board members’ money.
It’s the shareholders money, because Google is a public company. So the board authorized the payment of $500,000,000 of the shareholders money to save Larry Page’s sorry ass.
Needless to say, the shareholders noticed this and promptly sued Google’s board and executive team for breach of fiduciary duty of loyalty, abuse of control, unjust enrichment and corporate waste. For starters.
Now remember–Google has a super duper category of stock that you can only hold if your name is Schmidt, Brin or Page that gives these three guys 100% control over the board of directors. So you want it, you got it, kids. There’s no such thing as a truly independent board member, because no other shareholders can replace the board. In a way, the board did protect the shareholders’ interest, just the wrong ones.
This case is gradually moving toward a settlement and Google filed a tentative settlement with its stockholders. If you read the settlement it’s kind of normal stuff you’d expect to see in a settlement of this kind: Google refuses to admit liability, but agrees to spend more of the stockholder’s money to protect the world from Google’s management team. 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. Or copyright infringement. Why is that language in there? Golden parachutes for felons? Huh?
No idea, but we would love to know. And you know who else would like to know? Attorney General Jim Hood. (Interrogatory 18.)
And you know what? It doesn’t mention copyright once.
Send in the Shills
Let’s pause a moment and remember another case involving Google: Oracle v. Google. The judge in that case got so fed up with shillery he ordered the parties to disclose to the Court exactly who they paid to comment on the case and who they did not. Oracle’s filing was pretty short. Google’s, however, was not. Google denied that they paid any of these people to comment on the case and denied that any of them were acting under Google’s influence when they commented, but they paid them or the organizations that employed them for something.
Google had to be ordered to produce the list twice, of course. The “supplemental” filing has become known as the Google Shill List and has an interesting set of names and organizations. (This includes Timothy B. Lee who worked for Jeff Bezos’s Washington Post.)
The names that are interesting to us today are the ones that also appear on the amicus briefs filed against Attorney General Hood: Public Knowledge, the Electronic Frontier Foundation, Julie Samuels (working for EFF at the time now working at Engine Advocacy), the Communications and Computer Industry Association and the Center for Democracy and Technology.
Public Citizen has released a study called Mission Creepy a great guide to Google’s labyrinthine influence buying. According to Public Citizen, Google also gives money to R Street Institute, Engine Advocacy, New America Foundation (where Google Executive Chairman Eric Schmidt is on the board), and of course the Consumer Electronics Association.
Moving now back to the Google v. Hood amicus briefs, Google came up with three that we are aware of–one was filed in support of Google by the Consumer Electronics Association, the Computer & Communications Industry Association and Engine Advocacy (where Julie P. Samuels–remember her from the Google Shill List–is Executive Director), and a third by the Internet Commerce Coalition. Each organization is funded by Google. The CEA and CCIA alone lobby for companies whose combined market cap surely has to be somewhere around $2 TRILLION.
Another amicus brief was filed in support of Google by Public Knowledge, R Street Institute, New America Foundation’s Open Technology Institute, the Electronic Frontier Foundation and the Center for Democracy and Technology. The third was filed by the DLA Piper lobby shop for the Internet Commerce Coalition, also funded by Google according to Public Citizen.
In other words, the three amicus briefs filed in support of Google’s attempt to stop a criminal investigation were filed solely by organizations that receives funding from Google both directly and indirectly and in some cases has received that funding for many years. Even in the world of Google influence buying where organizations seem to be created by binary fission straight out of the Benjamins, this is an odd result.
Did Google pay these organizations to put their names on the briefs? We don’t have evidence of that level of detail. So it’s theoretically possible that the reason the organizations–most if not all tax exempt, by the way–put their names on the briefs is because their beliefs are as close to Google’s as one is to two. Or three.
But it sure is quite a coincidence.
Updated to include Internet Commerce Coalition.