Mr. Whitaker’s path to undercover operative began in 2005, when he took millions of dollars in orders for Apple iPods and other electronics at below market prices and skipped town without filling the orders, according to his account and court documents. He hopscotched around the U.S. in a private jet, evading arrest and protected by a private security detail. He briefly rented a Miami mansion for $200,000 a month.
He fled to Mexico in 2006 and started an Internet pharmacy, selling steroids and human growth hormone to U.S. consumers through Google ads, he said. The two substances—sold in the U.S. by prescription only—are sought by body builders to add muscle and by older consumers seeking to slow the signs of aging; they aren’t approved in the U.S. for such uses. Google’s policy prohibited advertising their sale online.
“It was very obvious to Google that my website was not a licensed pharmacy,” Mr. Whitaker wrote to the Journal. “Understanding this, Google provided me with a very generous credit line and allowed me to set my target advertising directly to American consumers.”
Mr. Whitaker was arrested in Mexico in March 2008 for entering that country illegally and returned to the U.S. to face charges of wire fraud, conspiracy and commercial bribery in the iPod case. Mr. Whitaker told U.S. authorities about the alleged role Google played in helping his Mexico-based pharmacy.
Federal prosecutors, seeking to test the allegation, set up a task force in early 2009 with Mr. Whitaker’s help. On weekdays, he was escorted from the Wyatt Detention Facility in Central Falls, R.I., to a former school department building in North Providence, R.I. There, under the watch of federal agents, he set a snare for Google.
Posing as the fictitious Jason Corriente, an agent for advertisers with lots of money to spend, Mr. Whitaker bypassed Google’s automated advertising system to reach flesh-and-blood ad executives. Federal agents created http://www.SportsDrugs.net, designed to look “as if a Mexican drug lord had built a website to sell HGH and steroids,” Mr. Whitaker said in his account of the sting.
Google first rejected it, along with an anti-aging website called http://www.NotGrowingOldEasy.com. But the company’s ad executives worked with Mr. Whitaker to find a way around Google rules, according to prosecutors and Mr. Whitaker’s account.
The undercover team removed a link to buy the drugs directly—instead requiring customers to submit an online request form—and Google approved it. “The site generated a flood of email traffic from customers wanting to buy HGH and steroids,” Mr. Whitaker said.
To pay Google’s fees for the growing online traffic, undercover agents made payments every two or three days with a government-backed credit card.
Federal agents grew more brazen. They created a site selling weight-loss medications without a prescription, according to Mr. Whitaker and people familiar with the matter. They also added another site selling the abortion pill RU-486, which in the U.S. can only be taken in a doctor’s office.
Google’s ad team in Mexico approved the site, so U.S. consumers searching for “RU 486” would see an ad for the site. Google ad executives allowed the agents to add the phrase “no prescription needed.”
Days later, federal agents added links to buy the drugs directly. Such sales broke U.S. laws prohibiting the sale of drugs from outside the country and without a prescription. “There were photos of the drugs, descriptions, labels that clearly printed out that we were shipping without a prescription and it was from Mexico,” Mr. Whitaker said.
By the end of the operation in mid-2009, agents were buying Google ads for sites purportedly selling such prescription-only narcotics as oxycodone and hydrocodone. Agents also got Google’s sales office in China to approve a site selling Prozac and Valium to U.S. customers without a prescription.
“Google’s employees were instrumental in bypassing policy regarding pharmacy verification,” Mr. Whitaker told the Journal. “The websites were blatantly illegal.”
At the agents’ direction, Mr. Whitaker said he signaled his illegal intent to Google ad executives, including Google’s top manager in Mexico. As a tape recorder ran, he walked Google executives through the illegal parts of the websites. He said he told ad executives that U.S. Customs had seized shipments, for example, and that one client wanted to be “the biggest steroid dealer in the United States.”
Agents at first ignored the flood of orders. But as the ersatz sites morphed into full-fledged Internet pharmacies, they worried that clients, some sick, would be expecting medication.
So customers were told they had to become members by filling out an online form and to receive a “membership kit.” The kits never arrived, but it stopped users from placing orders, Mr. Whitaker said.
In the summer of 2009, U.S. agents visited Google’s headquarters in Mountain View, Calif., to tell corporate executives about the evidence they had collected. Prosecutors served grand jury subpoenas and eventually collected four million pages of internal emails and documents, as well as witness testimony.
The federal task force, which also included the Food and Drug Administration’s Office of Criminal Investigation, was preparing criminal charges against the company and its executives for aiding and abetting criminal activity online, prosecutors said.
Google hired attorney Jamie Gorelick, the former deputy U.S. Attorney General under President Bill Clinton. Two years later, the company reached a settlement with the government, a decision that stopped the likely introduction of emails to top Google executives had the case gone to trial.
“Suffice to say this was not two or three rogue employees at the customer service level doing this on their own,” said Mr. Neronha, the U.S. attorney. “This was corporate decision to engage in this conduct.”
Six private shareholder lawsuits have so far been filed against Google’s executives and board members, alleging they damaged the company by not taking earlier action against the illegal pharmacy ads.
Google has other potential legal exposure. Record companies and movie studios say Google willfully profits from illegal Internet piracy—an issue raised last week, when Congress dropped antipiracy legislation after opposition from Internet companies, including Google.
A 2011 study commissioned by NBC Universal estimated that nearly a quarter of all Internet traffic relates to pirated movies, TV shows and games. “There’s big business in being agnostic about what sites you place your ads on,” said Jay Roth, national executive director of Directors Guild of America, which backed antipiracy legislation.
Online scams pose another potential legal threat. Searches relating to mortgage refinancing have been among the most popular on Google, Eric Schmidt said in 2009 when he was chief executive. An investigation by Consumer Watchdog, a consumer advocacy group, found that a large number of companies selling “mortgage modification” on Google bore the hallmarks of fraud.
The special inspector general’s office for the Troubled Asset Relief Program in November said it had shut down 85 alleged online loan modification schemes that defrauded homeowners through Google ads.
“Google has a natural long-term financial incentive to make sure that the advertisements we serve are trustworthy so that users continue to use our services, and we aren’t afraid to take aggressive action to achieve that goal,” the company said.
To end the sting, federal agents killed off Mr. Whitaker’s fictional character. They sent the Google employees a final email, allegedly from Jason Corriente’s brother, saying the online entrepreneur died in a car crash.
Mr. Whitaker, who pleaded guilty and faced a maximum 65-year prison term, was sentenced in December to six years, following what federal prosecutors called “rather extraordinary” cooperation. He is due for release in two years.