Shareholder sues Google over prescription drug ads

Lawsuit claims the search giant's financial statements have been "misleading" because they didn't include revenue generated from Canadian drug ads displayed in U.S.

Don Reisinger
Former CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
Don Reisinger
2 min read

Google isn't out of the woods just yet over its federal violation for displaying ads from online Canadian pharmacies.

The search giant yesterday was sued in the U.S. District Court for Northern California by Patricia McKenna, a shareholder, claiming the company's financial statements between 2003 and 2009 were "misleading," according to Bloomberg, which obtained the court documents. The issue with the financial statements, the plaintiff argues, is that Google didn't include the revenue it generated from Canadian drug ads that it displayed to U.S. customers, thus not delivering the full financial picture of the company.

In addition, the lawsuit--McKenna v. Page--argues that Google's management and board failed to live up to their duty to know what is legal and what is not.

Last week, the U.S. Department of Justice fined Google $500 million for violating federal law with the ads. By accepting the deal, Google acknowledged that it "improperly assisted Canadian online pharmacy advertisers to run advertisements that targeted the United States through AdWords." The federal government does not allow for the importation of drugs that have not been approved by the U.S. Food and Drug Administration. The drugs being sold by the online Canadian pharmacies were not approved for use in the U.S.

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"It is about taking a significant step forward in limiting the ability of rogue on-line pharmacies from reaching U.S. consumers, by compelling Google to change its behavior," Peter F. Neronha, U.S. Attorney for the District of Rhode Island, said last week. "It is about holding Google responsible for its conduct by imposing a $500 million forfeiture, the kind of forfeiture that will not only get Google's attention, but the attention of all those who contribute to America's pill problem."

Google commented publicly on the matter last week, saying that it had banned the ads "some time ago."

"However, it's obvious with hindsight that we shouldn't have allowed these ads on Google in the first place," a Google spokesman told CNET last week. The company generated a total of $500 million in revenue from the ad initiative.

Although the shareholder is concerned that the amount wasn't included in the search giant's financial statements, it's worth noting that it's not a huge figure when compared with Google's actual financial performance from 2003 through 2009. In 2010 alone, the firm generated $29.3 billion in revenue, besting its 2009 figure of $23.6 billion.

Google's shares are currently trading up $2.10 to $541.18. The company did not immediately respond to CNET's request for comment.

Update at 10:17 a.m. PT to include the plaintiff's name.