Google Inc. (GOOG) has been under criminal investigation by the U.S. Department of Justice for earning millions from accepting ads from illegal online pharmacies.

Google said in a regulatory filing Tuesday that it had set aside a half billion dollars for potential resolution of a U.S. government investigation related to online advertising. "In May 2011, in connection with a potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers, we accrued $500 million for the three month period ended March 31, 2011. Although we cannot predict the ultimate outcome of this matter, we believe it will not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows," Google said in its quarterly report on Form 10-Q for the quarter ended March 31, 2011.

Google didn't give additional details in its filing about the probe.

Google is close to striking a settlement with the Justice Department on the allegations that it profited from ads of Web sites that sell counterfeit or expired medicines or dispense the drugs without doctors' prescription, the Wall Street Journal Reported, citing people familiar with the matter.

The investigation is being conducted by the U.S. Attorney Office in Rhode Island, the Food and Drug Administration, and other agencies.

Google generated nearly $30 billion in total ad revenue in 2010 and $8 billion in the in the first quarter of this year, largely from its AdWords system. AdWords revolutionized Google's advertising, offering marketers the chance to bid to display their ads when people searched for certain keywords in Google. An advertiser only pays when a user clicks on the ad.

The U.S. government previously cracked down on three Internet giants for accepting ads from illegal gambling sites. In December 2007, Google, Yahoo Inc. and Microsoft Corp. paid a $31.5 million fine to settle the allegations.

Rogue Pharmacies

Google has struggled for years to deal with rogue online pharmacies.

In 2003, Google started banning ads from U.S. companies that offer drugs like Vicodin and Viagra without a prescription. In February last year, Google updated its AdWords policy, deciding to "only accept ads from pharmacies accredited by the National Association Boards of Pharmacy VIPPS program, and from online pharmacies in Canada that are accredited by the Canadian International Pharmacy Association (CIPA).

"Despite our best efforts-from extensive verification procedures, to automated keyword blocking, to changing our ads policies -- a small percentage of pharma ads from these rogue companies is still appearing on Google," the search giant said in September last year.
Google against advertissers who put up rogue pharmacies. "It's been an ongoing, escalating cat-and-mouse game-as we and others build new safeguards and guidelines, rogue online pharmacies always try new tactics to get around those protections and illegally sell drugs on the web," Google said.