Grant Shapps, the Conservative housing minister tipped for promotion to the cabinet this week, founded a family business selling software that increases a website's advertising revenue by breaching Google's code of practice.

The $497 (£313) software package, TrafficPaymaster, creates web pages by "spinning and scraping" content from other sites to attract advertising from Google.

Millions of people who have blogs or websites are paid for hosting ads on Google's behalf using the AdSense service, which scans a web page and posts adverts related to the content. TrafficPaymaster creates an instant cashflow by appearing to plagiarise information.

Google has strict rules on "unoriginal content". Its AdSense policy says: "Sometimes we come across sites that are using software to generate automated content. These sites might look like normal news sites, but the information is completely plagiarised. Scraping content and passing it off as one's own is not only wrong, but it also happens to be a serious violation of our policies."

Shapps, a rising Tory star who many say could end up as party chairman in the reshuffle, set up web sales business HowToCorp in 2005.

Going under the name Michael Green and casting himself as an internet marketing guru, Shapps in 2007 claimed audiences could "make $20,000 in 20 days guaranteed or your money back" – if they spent $200 buying his bespoke software.

Shapps previously told journalists he used the name Michael Green for the business to keep it separate from his political work.

In 2008 Shapps transferred his share of the company to his wife, Belinda. The family business continues to sell online toolkits such as Michael Green's "How To Bounce Back From Recession".

In a post to an online forum this year, HowToCorp's Sebastian Fox – who also signs off as Michael Green – dismissed Google's attempts to police the internet. He said: "The real question is whether there are any signs about how a page has been created. If the answer is no, well then it doesn't much matter what Google officially thinks."

On Sunday sources at Google confirmed TrafficPaymaster was in "violation" of its policies and that its search engine's algorithms had been equipped to drop the ranking of any webpages created using HowToCorp's software. Officially, Google said it does not comment on individual cases.

"We have strict policies in place to ensure web users are presented with useful ads when browsing sites in our content network and to ensure our advertisers reach an engaged audience. If we are alerted to a site which breaks our AdSense policies, we will review it and can remove it from our network."

This is the second time in recent weeks Shapps has found himself at the centre of an internet row. In July the MP was forced to deny he used software to boost the number of followers to his Twitter account, after an online argument with Lord Prescott, the Labour former deputy prime minister.

Shapps is followed by 57,000 people on Twitter and says he achieved this by following and unfollowing thousands of people each week. In the week to 16 July, he had followed and unfollowed more than 3,000 people – an average of nearly 450 per day.

However, in an email to subscribers entitled "How To Build a BIG List", HowToCorp recommended people purchase TweetAdder, an automated tool for mass following and unfollowing people on Twitter. Until June, Shapp's wife Belinda, the sole director and owner of HowToCorp, had not used Twitter regularly and wrote on her own website that she was a "self-confessed social media novice".

When contacted by the Guardian, a spokesman for Shapps denied the minister set up the business, saying it was "always a partnership between Mr and Mrs Shapps" which began in 2000. He added: "Grant Shapps derives no income, dividends, or other income from this business, which is run by his wife Belinda with a registered office in Pinner in north-west London. He is quite simply not involved in this business.

"Mrs Shapps runs her own online business, uses freelancers, moderators and programmers to post on forums, generate products and maintain a help desk."