The Washington Post published a story today about a class action lawsuit that has been filed against Yahoo! accusing them of encouraging click fraud through use of spyware and adware products. Additionally the suit claims that Yahoo! allows ads to be displayed on "typosquatter" Web sites that capitalize on misspellings of popular trademarks or company names.

"Potentially more explosive is the plaintiff's claim that Yahoo regularly uses its relationship with adware and typosquatting sites to gin up extra revenue around earnings time, alleging that the company is conspiring to boost revenue by partnering with some of the Internet's seamier characters," the Post reports.

Even more damning, the suits states that "not only have Defendants turned a blind eye to abuse of their [pay-per-click] advertising system, but Defendants knowingly have manipulated that system for their own benefit, by increasing the volume of improper advertising displays during financial reporting periods when Defendants were at risk of failing to meet investor expectations."

Plaintiffs have yet to divulge the source of their information on the conspiracy allegations but added that the information would come to light at trial if Yahoo decided not to settle the case. So it appears they are looking to settle out of court before the case goes to trial.