FedEx could face $1.6bn fine over illegal drug shipping charges
FedEx Corp is facing charges from the US government for its transportation role in the sale of illegal prescription drugs in the United States. A federal grand jury indicted FedEx Corp and its subsidiaries FedEx Express and FedEx Corporate Services yesterday for allegedly providing the shipping as Internet pharmacies sold prescription in violation of controlled substances laws.
The claims follow a nine-year investigation.
According to the indictment, the prescription drugs were sold from 1998 without prescriptions, and without doctors providing physical examinations of patients buying the drugs.
FedEx, which has been summoned to appear in federal court in San Francisco later this month, denies the allegations.
The company could face a fine of up to $1.64bn the US Attorney’s Office of the Northern District of California said yesterday.
The indictment claims that federal drug enforcement authorities and even members of Congress had warned FedEx as far back as 2004 that illegal online pharmacies were using its shipping services to distribute medicines.
The claims also allege that FedEx arranged its sales policy for online pharmacies to protect staff sales commissions “from the volatility caused by online pharmacies moving shipping locations often to avoid detection by the DEA”.
Federal prosecutors claim that FedEx “knew that it was delivering drugs to dealers and addicts” from 2004, and arranged special collection arrangements for “problematic” shippers where, for example, FedEx drivers faced pressure from recipients demanding their drugs.
US Attorney Melinda Haag said yesterday that the rise of Internet pharmacies had seen “massive amounts” of illegal prescription drugs shipped across America.
“This indictment highlights the importance of holding corporations that knowingly enable illegal activity responsible for their role in aiding criminal behavior,” she said.
“Innocent”
FedEx issued a statement yesterday insisting it was innocent of the charges, and promising to defend the “attack on the integrity and good name of FedEx and its employees”.
Patrick Fitzgerald, the Memphis-based company’s senior vice president marketing and communications, said FedEx policy was to refuse to provide shipping to companies named by the US Drug Enforcement Agency as an illegal online pharmacy.
“We have repeatedly requested that the government provide us a list of online pharmacies engaging in illegal activity,” said Fitzgerald. “So far the government has declined to provide such a list.”
Privacy
In its statement, FedEx suggested that the prosecution now threatened the privacy involved in the whole business of shipping.
“FedEx transports more than 10 million packages a day. The privacy of our customers is essential to the core of our business. This privacy is now at risk, based on the charges by the Department of Justice related to the transportation of prescription medications,” said Fitzgerald.
“We want to be clear what’s at stake here: the government is suggesting that FedEx assume criminal responsibility for the legality of the contents of the millions of packages that we pick up and deliver every day. We are a transportation company – we are not law enforcement. We have no interest in violating the privacy of our customers. We continue to stand ready and willing to support and assist law enforcement. We cannot, however, do the job of law enforcement ourselves.”
UPS
FedEx rival UPS was also investigated from 2004 over the shipping of items from illegal Internet pharmacies. However, the Atlanta-based firm paid a $40m fine and admitted to a Department of Justice statement of facts laying out how some of its sales staff had targeted illegal online pharmacies for their potential business.
“Despite being on notice that such Internet pharmacies were using its services, UPS did not implement procedures to close the accounts of those pharmacies, permitting them to ship controlled substances and prescription drugs from 2003 to 2010,” the document states.
UPS confirmed in its November 2013 quarterly filing to the US Securities and Exchange Commission: “On March 29, 2013, we entered into a Non-Prosecution Agreement with the United States Attorney’s Office in the Northern District of California in connection with an investigation by the Drug Enforcement Administration of shipments by illicit online pharmacies.
“Under the NPA, we forfeited $40m to the government, admitted to a Statement of Facts describing the conduct leading to the agreement, and agreed to implement an online pharmacy compliance program. The term of the NPA is two years, although we can petition the government to shorten that term in its discretion to one year.”
