FedEx to pay $8m to settle claims over late delivery "excuses"

FedEx has settled a lawsuit with the US government regarding claims that its couriers took advantage of extra security measures in the wake of the 9/11 terrorist attacks as an “excuse” for late deliveries to government locations. The US Department of Justice said this week that FedEx Corp will pay $8m to avoid a lengthy and costly legal case.

The allegations were first made by whistleblower Mary Garofolo, a resident of Maryland and a FedEx employee, who said FedEx staff were blaming extra security screening at government sites after September 11, 2001, for late packages “even after heightened security measures subsided or became routine”.

Couriers were “misusing” delivery exception codes to avoid requirements to refund government customers for missing guaranteed delivery times, said the DoJ, primarily in Priority Overnight services requiring delivery by 10.30am, but also some standard services that should have delivered by 3pm.

Court papers originally filed under seal suggest that over a period of years, the “deliberate scheme” netted FedEx millions each year.

FedEx has denied the claims, but a spokesman said the company was settling to avoid a long legal battle.

The DoJ was suing FedEx under the False Claims Act, which encourages whistleblowers to come forward on behalf of the United States and receive a portion of settlement or penalties awarded. Garofolo is to receive a $1.44m share from the FedEx settlement, the DoJ said.

The settlement, which was unsealed on Tuesday, came as a result of action by the US Attorney’s Office for the District of Columbia, the General Services Administration and the Departments of Justice and Agriculture.

US Attorney Ronald C. Machen Jr said: Companies that commit to provide services to the United States are expected to meet their commitment and not ‘game the system’ to take advantage of their government customers for the benefit of their own bottom line.”

In a statement, the Acting Inspector General for the Department of Justice, Cynthia A. Schnedar, said companies contracting with the US government had to be accountable for the misconduct of their employees.

“We will ensure that the government funds are spent wisely and in accordance with negotiated contracts and procedures,” she said.

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