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Canada drug ads cost Google $500 million

Google Inc. has agreed to pay $500 million to settle a U.S. government investigation into the Internet search leader's distribution of online ads from Canadian pharmacies illegally selling prescription drugs to American consumers.

The settlement means Google will not face criminal prosecution on allegations that it improperly profited from ads promoting Canadian pharmacies that illegally exported drugs to the United States, Rhode Island U.S. Attorney Peter F. Neronha said. It is the first time an Internet search engine is being held responsible for illegally distributing drugs.

"It sends a clear message to both Google and to others that contribute to America's pill problem that they will be held to account for endangering the health and safety of the residents of this district and to persons all across the United States," said Neronha, who described the settlement as one of the largest in U.S. history.

The settlement delivered a stinging rebuke to Google, whose motto is "Don't be evil." In announcing the settlement, authorities left little doubt that Google had misbehaved. From the government's vantage point, Google crossed into a shady area of prescription-drug advertising in pursuit of higher profits, which have boosted its stock price and enriched its employees since the company's initial public offering in 2004.

In that sense, the potential damage to Google's reputation may be more troubling to the company than the amount of money it's paying to sweep the problem under the rug. The $500 million is a sum Google can easily afford; it had $39 billion in cash at the end of June.

The settlement figure represents the gross revenues Google collected in ad buys from hundreds of Canadian pharmacies, plus the earnings generated from the illegal drug sales to American consumers from 2003 to 2009, federal investigators said.

Google said in a statement that it should not have allowed Canadian pharmacies to market prescription drugs to American consumers.

"We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago," the statement said. "However, it's obvious with hindsight that we shouldn't have allowed these ads on Google in the first place." The company declined further comment. Google shares were up slightly Wednesday, finishing the day at $523.

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