That statement from Google would only be a lie if the students were getting ads. The article says the complaint is that "the firm harvested their data for commercial gain without their consent". I could not determine from the article exactly what harvesting was done or what commercial gain derived from that.

Google has maintained that the email scanning for targeted advertising is not a privacy issue in that it is automated and there are no details leaked outside the system. If it turned out that the scanning was done and no actions resulted from that then the whole thing would become philosophical.