Google pays out $500 Million to Settle Criminal Investigation
Google draws over 1 billion visits to its websites each month, making it the world's largest Web property. You may have heard that search giant Google Inc. has agreed to pay $500 million to settle a Justice Department investigation into allegations that it improperly accepted ads from online Canadian pharmacies that import prescription drugs into the US. Google agreed to forfeit $500 million, which represents revenue it earned in ads from Canadian pharmacies plus revenue earned by the pharmacies, the Justice Department announced in a statement, calling it one of the largest ever forfeitures. The DOJ said that it is almost always illegal to import prescription drugs into the U.S., because the FDA cannot ensure the safety and effectiveness of the foreign drugs.
Google can now be added to the long and ever-growing list of unethical companies that put profits and self-interests ahead of doing the right thing. I’ve previously blogged about the lack of corporate social responsibility. Corporations lack a collective conscience because they fail to reflect on their actions prior to taking them; cover-up when caught; and repeat the offensive behavior. They seem to act as if they are above the law. Their ethical blindness has cost society trillions in lost wealth and the cost to government to create regulations they themselves criticize, but fail to realize it’s because of their bad behavior. If only corporation would self-regulate, then perhaps those moneys could be used to truly stimulate the economy and help fund start-ups.
Here are a group of standards I suggest corporations follow to be ethical:
Honesty and Transparency
- Be honest and open about transactions and activities. Don’t withhold relevant information. Be transparent.
- Act in a trustworthy manner. The public must rely on the diligence and good faith of companies in carrying out company operations.
- Be principled and consistent in action and deed. Avoid giving in to pressures within the organization to engage in or condone improper behavior.
Responsibility and Accountability
- Be responsible and accountable for actions and decisions. Admit mistakes right away; be contrite about the mistake; promise to never do it again…and DON’T!
- When faced with a conflict consider the consequences of proposed actions on affected parties. Strive to follow the basic principle: “First, do no Harm.”
- Reflect on proposed actions before making a final decision. Ask: Would I want my actions to be examined on the front pages of the newspaper.
Google admitted that the company had banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago. Google acted with reckless disregard (my characterization) by putting profits over the possible effects of their actions on the consuming public.
That’s not all. Recently the FTC concluded an antitrust investigation into whether Google had been profiting from illegal activity. In 2007 the three largest Internet companies, Google, Microsoft, and Yahoo agreed to pay a combined $31.5 million fine to settle civil allegations by DOJ that they had accepted ads from illegal gambling sites.
The FTC is also investigating whether Google is taking information like local business reviews that is collected by competitive sites for use on its own sites. The agency also wants to know if Google is giving its own sites, such as Places pages and Google Finance, higher placement in search results than competitive sites.
Google is also facing a separate antitrust investigation launched last year by the European Commission. That investigation is focused on a similar issue -- whether Google abused its dominant position in search to promote its own services.
It will be a difficult case to make: Google says the site is free to users, and “if you don't like its results, you can go elsewhere for information.” And despite its dominant market share, Google argues it doesn't have a monopoly, pointing out there are other search engines like Bing. But more important, it says the FTC's notion of search is antiquated.
What an unethical, irresponsible, insensitive approach to business that is especially offensive given the size and scope of Google’s actions. It’s clueless when it comes to acting with integrity and as a good corporate citizen. Perhaps it’s time for the FTC to open up a separate division just to investigate Google. The company acts like a bully. Perhaps the company motto should be the spins starts here. Google has created a culture of wrongdoing and rationalization for unethical actions that infect other areas of its operations.
The NY Times recently reported that some of the largest US corporations are pressing the Obama administration for tax breaks to encourage the repatriation of profits and use to stimulate the US economy. Google has $17 billion offshore. Under the proposal, known as a repatriation holiday, the federal income tax owed on such profits returned to the United States would fall to 5.25 percent for one year, from 35 percent. In the short term, the measure could generate tens of billions in tax revenues as companies transfer money that would otherwise remain abroad, and it could help ease the huge budget deficit.
Corporations and their lobbyists say the tax break could resuscitate the gasping recovery by inducing multinational corporations to inject $1 trillion or more into the economy, and they promoted the proposal as “the next stimulus.” For every billion dollars that we invest, that creates 15,000 to 20,000 jobs either directly or indirectly,” Jim Rogers, the chief of Duke Energy, said at the conference. Duke has $1.3 billion in profits overseas.
But that’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment; 800 companies took advantage. Though the tax break lured them into bringing $312 billion back to the US, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nopartisan National Bureau of Economic Research.
This money comes from overseas operations and in some cases accounting maneuvers that shift domestic profits to low-tax countries. The study concluded that the program “did not increase domestic investment, employment or research and development.” Indeed, 60 percent of the benefits went to just 15 of the largest US multinational companies — many of which laid off domestic workers, closed plants and shifted even more of their profits and resources abroad in hopes of cashing in on the next repatriation holiday.
That’s the moral rub. A “one-time” reduction of the repatriation rate creates a moral hazard. Other companies may come to believe if they just park their profits overseas sooner or later the government will institute a partial tax holiday. Moreover, it is highly unfair to US companies that have been paying their fair share all along. What message does it send to society: Do the wrong thing and you eventually you will be rewarded!
Blog posted by Steven Mintz, aka Ethics Sage, on August 31, 2011