Inside Google

A leading California consumer group has formally asked White House counsel to rule on the ethics of what it calls the Obama Administration’s “inappropriate” outreach — including State Dinner invites — to head honchos of Google, a firm reportedly under criminal investigation by the Justice Department.

Jaime Court — who heads the Santa Monica-based non-profit, Consumer Watchdog — made the charges in a recent letter to White House counsel Kathryn Ruemmler. His letter argues that the Obama Administration’s June invitation for Google’s executive chair Eric Schmidt and vice president Marissa Mayer to the state dinner honoring German chancellor Angela Merkel not only represented an “inappropriate conflict of interest” — but “undercuts” federal investigators looking into the search engine giant.

A recent Wall Street Journal story reported a settlement may be near regarding the investigation “into whether Google made hundreds of millions by accepting (drug) ads from online pharmacies that break U.S. laws.”

But Court, in his letter to Ruemmler — who is charged with overseeing White House ethics policy — specifically urged her to rule that Administration members should at least “distance themselves” from the firm “until the investigation is concluded.”

Court’s Santa Monica-based advocacy group has recently taken a lead role in challenging Google on a range of consumer issues, particularly privacy. It launched this animated “avatar-style” web ad jabbing Schmidt refusing to testify to Congress on those issues — and painting him as a “Dr. Evil” kind of character.

(Click here to view the video.)

Consumer Watchdog’s Google spots are the product of San Francisco-based SCN Strategies, Democratic strategists Ace Smith, Dan Newman and Sean Clegg.

The latest news comes with increasing focus on Google, a firm that has ramped up its presence in Washington and its political contributions even as it has faced questions on privacy and other issues. One Politico story this week underscored some of the changing political landscape for the Mt. View-based internet giant, which is now the target of a Federal Trade Commission anti-trust probe. The story’s premise: “Will Silicon Valley turn on Google?”

Another focused on “Google’s Growing Army” of political consultants hired as lobbyists to deal with the company’s issues in D.C.

Even as these stories swirl, Court notes Google executives have been A-list invitees at recent Obama events. As the Chronicle has reported, Schmidt was one of about a dozen tech leaders invited to the private dinner in February with the President at the Woodside estate of venture capitalist John Doerr. Last year, Obama himself travelled to the home of home of Mayer in Palo Alto to star at a sold-out private fundraiser.

Excerpts of Court’s letter:

“It’s unheard of for the President to publicly embrace a corporate executive whose company is under criminal investigation by the U.S. Justice Department. Nonetheless, the Obama Administration continues to have close relationships with top executives of Google Inc. while the company is the target of serious federal investigations for possible wrongdoing.”

“It has long been a tradition to invite some business leaders to attend these White House functions. However, executives of companies under federal criminal investigation should not be invited while a major case is pending. Allowing such executives to hobnob at a gala White House event inevitably sends a message that the Administration supports them and undercuts the ability of federal investigators to proceed with their case in a fair and unbiased way.”

Court’s letter charges Google “is under criminal investigation into allegations that it profited from selling online ads to illegal pharmacies” which may be violating U.S. law “by peddling expired or counterfeit prescription medication, or selling medicine without a physician’s prescription.” Even before the Merkel dinner, Court noted in his letter, “Google had begun negotiating a settlement of the charges and had filed notice with the Securities and Exchange Commission that it was setting aside $500 million — roughly one-sixth of its 2011 first-quarter revenue — to resolve the case.”

That’s in addition, Court says, to fed inquiries into antitrust issues, most recently in relation to Google’s proposed acquisition of AdMeld.”

We’ve asked Google and the White House for comment, and offered them a chance to respond. So far, no response — but we will post if we get an update.