Back in 2011, a group of law-enforcement officials in Rhode Island announced a huge $500-million settlement with Google to end a probe into the illegal use of its advertising platform to sell prescription drugs. With the help of the Chafee administration and Rhode Island’s two U.S. senators, North Providence and East Providence were allowed to use $70 million from the settlement to shore up their public-safety pension plans.

Wired magazine’s Jake Pearson is out with a big feature called “Drugstore Cowboy” that tells the behind-the-scenes story of the federal sting that led to Rhode Island’s Google windfall. Here’s a sample:

On February 25, 2009, a then 34-year-old career con man named David Anthony Whitaker left the Wyatt Detention Facility in Central Falls, Rhode Island, and slid into the backseat of an unmarked government car. … This was merely standard procedure when transporting a government cooperator. …

He had been bringing in obscene amounts of money by selling black-market steroids and human growth hormone online. …

That life ended on March 19, 2008, when a Mexican immigration agent nabbed Whitaker and brought him back to LAX, where the Secret Service promptly arrested him. …

At one point during a meeting with Whitaker and his lawyer, the Feds asked him how he had grown his online enterprise. Whitaker’s answer was immediate: He had used Google AdWords. In fact, he claimed, Google employees had actively helped him advertise his business, even though he had made no attempt to hide its illegal nature. It was reasonable to assume, Whitaker said, that Google was helping other rogue Internet pharmacies too.

Read the rest on Wired.com.

• Related: Let’s put the $165M from Google into the police pension funds (April 3, 2012)

Moody’s Investors Service is criticizing Providence leaders – and, implicitly, Superior Court Judge Sarah Taft-Carter – for running a $15 million operating deficit during the 2011-12 fiscal year, but softened its criticism based on other steps the Taveras administration has taken.

“The shortfall is credit negative as the city’s financial position has weakened considerably over the past four years,” Moody’s analyst Vito Galluccio wrote in a note to investors. “However, its balanced budget for [fiscal] 2013 indicates some progress toward restoring fiscal stability.”

Galluccio cited two big drivers of the $15 million operating deficit: Taft-Carter’s mathematically flawed ruling last year that the city didn’t need to move its retirees to Medicare, and various types of tax revenue failing to meet the city’s projections. The deficit would have been even larger if the city hadn’t shorted its 2012 contribution to the Providence pension fund by $5.4 million, he said.

“The 2012 results follow several years of operating deficits that have left the city in a precarious financial position,” Galluccio said. He blamed the fiscal crisis on a $125 million reduction in state aid during former Mayor David Cicilline’s second term and “rapidly growing expenditures related to employee salaries and benefits.”

(more…)

The Wall Street Journal’s headline says it all: “Google’s $500M Penalty A Windfall For Rhode Island.” A whopping $230 million is coming to law enforcement agencies in the state for their work on the Google advertising investigation.

The U.S. Attorney’s office says $60 million is going to the East Providence Police Department, $60 million is going to the North Providence Police Department and $45 million is going to the Rhode Island State Police.

“It’s far from clear what the money will be used for,” The Journal’s Bruce Landis reports, “partly because there’s so much of it and partly because officials haven’t had much time to think.”

Here’s an easy answer: Put the money into the police departments’ pension funds.

East Providence’s pension fund for police officers and firefighters has a $65 million funding shortfall – the Google money could nearly wipe that out. North Providence’s pension fund for police officers has a $9.4 million funding shortfall – just a small share of the Google money could close the gap.

As for the state police, not a penny has been saved to pay the pensions of troopers hired before 1987, and Treasurer Raimondo’s staff never figured out how much the state owes them. This would be a good time to find out, and then make a down payment.

The Journal says there are restrictions on how the money can be used. Well, I say this is worth some negotiations – because putting less pressure on the municipal budgets in East Providence and North Providence, and ensuring a secure retirement for police officers, seem like policies that would help law enforcement in both places.

Fascinating story with a Rhode Island angle in The Wall Street Journal:

PROVIDENCE, R.I. — Wearing leg irons and guarded by federal agents, David Whitaker posed as an agent for online drug dealers in dozens of recorded phone calls and email exchanges with Google sales executives, spending $200,000 in government money for ads selling narcotics, steroids and other controlled substances.

Over four months in 2009, Mr. Whitaker, a federal prisoner and convicted con artist, was the lead actor in a government sting targeting Google Inc. that yielded one of the largest business forfeitures in U.S. history.

“There was a part of me that felt bad,” Mr. Whitaker wrote in his account of the undercover operation viewed by The Wall Street Journal. “I had grown to like these people.” But, he said, “I took ease in knowing they … knew it was wrong.”

The government built its criminal case against Google using money, aliases and fake companies—tactics often used against drug cartels and other crime syndicates, according to interviews and court documents. Google agreed to pay a $500 million forfeiture last summer in a settlement to avoid prosecution for aiding illegal online pharmaceutical sales.

Read the rest here. Thanks to reader DB for flagging it. The Projo wrote about Whitaker back in 2008.

U.S. Sen. Sheldon Whitehouse, the only member of Rhode Island’s congressional delegation who supports controversial anti-piracy legislation, said Thursday night he’s open to changing the bill.

“I’ve heard from many Rhode Islanders who are concerned about this bill and I share their desire to preserve the free and open nature of the Internet,” Whitehouse, who is in the Philippines with other senators, told WPRI.com in a statement. “I remain concerned about the effect of online piracy on jobs and consumer safety, and continue to support legislation to address this problem.”

“That said,” he continued, “I look forward to working with my colleagues to consider further improvements to the bill before a final vote is held – whether that happens next week or at a later date.” Whitehouse’s colleagues – Jack Reed, Jim Langevin and David Cicilline – say they also support the goal of cracking down on Internet piracy.

Senate Majority Leader Harry Reid announced Friday morning that he has decided to postpone Tuesday’s scheduled vote on the Senate anti-piracy bill, the Protect IP Act, in the hopes of finding “a compromise in the coming weeks.” Whitehouse has been a cosponsor of the bill since it was introduced last May.

Politico reported that the anti-piracy bills were “hanging on for dear life Thursday.”

Whitehouse’s Republican challenger, Barry Hinckley, criticized the senator’s support for the bill this week. Christopher McAuliffe, a spokesman for Hinckley, suggested “it makes more sense in light of the over $200,000 in campaign contributions Whitehouse has received from the entertainment industry.” Whitehouse’s allies dismiss that, pointing to his years in law enforcement and his concern with unfair economic competition from abroad.

• Related: Whitehouse bucks Wikipedia, stays sponsor of Protect IP Act (Jan. 18)

Google is protesting the two bills

Wikipedia’s blackout hasn’t convinced U.S. Sen. Sheldon Whitehouse to drop his support for a controversial bill to beef up regulation of the Internet.

“The PROTECT IP Act is a sensible, bipartisan response to this serious problem,” Whitehouse, D-R.I., told WPRI.com in a statement Wednesday.

The bill would “advance protections for American intellectually property online,” he said. The freshman Senate Judiciary Committee member has been a cosponsor of the legislation since U.S. Sen. Patrick Leahy, D-Vt., introduced it May 12.

The PROTECT IP Act and its House counterpart, the Stop Online Piracy Act (SOPA), have run into a firestorm of opposition online and been criticized for potentially compromising cybersecurity by lawmakers including Whitehouse’s Rhode Island colleague, Congressman Jim Langevin. Wikipedia and Google are among a host of sites protesting the bills publicly Wednesday.

(more…)

The Web, it is a-changin’.

Facebook passed Google as the United States’ most visited website in 2010, Bloomberg News reports:

Facebook received 8.9 percent of all US Web visits between January and November 2010, according to New York-based Internet tracker Experian Hitwise.

Google’s main site was second with 7.2 percent, followed by Yahoo Inc.’s Mail service, Yahoo’s Web portal, and Google’s YouTube.

Facebook has more than 500 million users and commands a valuation of more than $40 billion on exchanges for privately held companies.

The site’s leadership in social networking has attracted advertisers such as Coca-Cola Co. and JPMorgan Chase & Co., letting Facebook reach sales of about $2 billion this year, according to people familiar with the matter.

Bloomberg’s report does leave out one caveat – Google was still No. 1 when you combine its various properties (Google.com, Gmail, YouTube, Google News, etc.). By that measure, Google got 9.85% of all U.S. visits to Facebook’s 8.9%, according to Hitwise.

Still, Facebook’s rapid growth continues to be nothing short of astonishing. I certainly underestimated Facebook’s potential; unlike Google, which seemed to me like it would be a big deal from the start, I can’t say I sensed what was ahead for “TheFacebook” the day I joined it in March 2004. Then again, considering how rapidly word of the site spread across BU’s campus that day, I probably should have.

If you’re interested in the Facebook-Google rivalry – and you should be, considering the immense power those two companies now have over our digital lives – I recommend Wired magazine’s provocative article about the two from last summer. Here’s an excerpt:

Today, the Google-Facebook rivalry isn’t just going strong, it has evolved into a full-blown battle over the future of the Internet—its structure, design, and utility. For the last decade or so, the Web has been defined by Google’s algorithms—rigorous and efficient equations that parse practically every byte of online activity to build a dispassionate atlas of the online world. Facebook CEO Mark Zuckerberg envisions a more personalized, humanized Web, where our network of friends, colleagues, peers, and family is our primary source of information, just as it is offline. In Zuckerberg’s vision, users will query this “social graph” to find a doctor, the best camera, or someone to hire—rather than tapping the cold mathematics of a Google search. It is a complete rethinking of how we navigate the online world, one that places Facebook right at the center. In other words, right where Google is now.

Update: And now Goldman Sachs has made an investment that values Facebook at $50 billion.

(photo: Wikipedia)

Or is it?

The blog Very Small Array put together this map of the United States last Friday by replacing the states’ names with the top suggestion offered by Google’s Autocomplete feature when you type each one in. Here’s what it found:

Seems to me a number of these are driven by students frantically trying to figure out their homework. (“Shoot! What was the Missouri Compromise?” Same deal for Massachusetts Bay Colony.)

According to the map, the first Autocomplete suggestion for “Rhode Island” is Rhode Island School of Design. But when I went to Google and typed in “Rhode Island” myself, the top suggestions were “Rhode Island College,” “Rhode Island DMV” and “Rhode Island Hospital.”

That’s probably because of Google’s new personalized results, which it unveiled about a year ago. What I saw may be the top three Autocomplete suggestions for people in Rhode Island when they type in the state’s name, whereas people nationwide are most likely looking for RISD. Just a guess, though.

Courtesy Library of Congress

The Wall Street Journal ran an interesting story on Tuesday discussing how Americans are spending more money on gadgets – smartphones, iPads, blu-ray players, flat-screen TVs – and less on appliances like refrigerators as the economy remains weak:

The shift reflects a change in priorities for American consumers. After pouring money into all aspects of their homes during the previous decade, consumers are redirecting their purchases to eye-grabbing technology and socking away more of what’s left over into savings. Apparel company executives are worried the lure of electronics will eat into their sales as the back-to-school season gets under way.

This actually fits with an idea I’ve been mulling for the past two years – namely, that gadgets (especially relatively affordable ones) are playing a similar role to the one played by radio during the Great Depression. It was during the 1930s, amid mass unemployment almost unimaginable today, that radio really took off in the United States, as Bruce Lenthall writes in the book “Radio’s America”:

As commercial enterprises, the networks created programs designed to be consumed by a wide following. And with the broadcasting system that would endure for most of the century in place, listeners tuned in to those programs in droves. Radio ownership more than doubled in the 1930s, from about 40 percent of families at the decade’s start to nearly 90 percent ten years later. By 1940 more families had radios than had cars, telephones, electricity, or plumbing. To the members of that vast audience, radio, and particularly network offerings, became an integral part of their daily lives during the Depression. Americans loved the new medium, listening to each set an average of four to five hours a day. And with listeners preferring national programs to local ones by a ratio of nearly nine to one, audiences tuned those sets to network stations for most of those hours. Across the country, millions and millions of listeners heard the same programs for hours each day.