Investors Sue Google Directors Over $500m DoJ Payout

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Larry Page and Eric Schmidt are named in lawsuits over $500m settlement for illegal drug advertising

Google’s board is being sued by unhappy investors over the $500 million (£303m) paid last month to settle allegations over advertising illegal prescription drugs in the US.

A pair of lawsuits have been filed against Google’s board of directors, CEO Larry Page, chairman Eric Schmidt, co-founder Sergey Brin and several executives, reports ComputerWorld.

It is claimed they breached their fiduciary duties by facilitating illegal imports of prescription drugs into the US from Canadian pharmacies with the AdWords system.

The lawsuits charge Google’s directors with violating their duties as corporate officers and wasting company money by allowing the pharmacies to purchase the online adverts.

“The breadth and scope of the wrongdoing was astonishing,” says one of the lawsuits quoted by ComputerWorld . “From 2003 to 2009, Google knowingly assisted Canadian pharmacies in advertising the illegal sale of prescription drugs.”

They demand Google directors and executives repay the $500 million and pay damages decided by a jury to “punish defendants and to make an example of defendants,” according to Computer World.

Turning a blind eye

Google settled with the US Department of Justice (DoJ) in August over the allegations it let online Canadian pharmacies advertise prescription drugs to US citizens.

According to the DoJ’s press release announcing the settlement, Google was aware from 2003 that it was nearly always illegal to import drugs from Canada. However, it did not act to stop the advertising until it became aware it was being investigated.

One of the lawsuits says: “Google’s quick response after learning about the [DOJ] investigation shows that the Individual Defendants could have, at any time of the six-year-long scheme, stopped the Company from assisting the online pharmacies,” reports ComputerWorld.

The cash stumped up by Google represents the revenue earned from the offending ads and by the Canadian pharmacies shipping the drugs. It is one of the largest forfeitures in the US ever, according to the DoJ.

Under the terms of the agreement with the government Google acknowledged improperly assisting Canadian online pharmacies and accepted responsibility for its conduct.

“We banned the advertising of prescription drugs in the US by Canadian pharmacies some time ago,” a Google spokesperson told The Wall Street Journal at the time the sttlement was announced. “However, it’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place.”

The lawsuits also reportedly name, among others, current board members John Doerr, of venture capital firm Kleiner Perkins Caufield & Byers; John Hennessy, the president of Stanford University; Paul Otellini, the CEO of Intel; and Shirley Tilghman, president of Princeton University.

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