The full context of that Schmidt quote was that he was warning people that whatever they do, the government has legal (or as it turned out, extra-legal) ways to find out.

"the reality is that search engines, including Google, do retain this information for some time. And [...] we’re all subject, in the US, to the Patriot Act, and it is possible that that information could be made available to the authorities."

That seems like a good warning, hardly evidence of some nefarious bias.