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FedEx, UPS Part of U.S. Probe of Illegal Drug Shipments

FedEx Corp. and United Parcel Service Inc. have participated in a federal grand jury investigation of shipments by online pharmacies that may have operated illegally.

UPS said in a regulatory filing that it responded to subpoenas as far back as 2007 from the U.S. attorney in San Francisco in connection with an investigation by the Drug Enforcement Administration. The company said it is cooperating with the investigation and exploring a settlement with the government, including paying a fine.

“Such a payment may exceed the amounts previously accrued with respect to this matter, but we do not expect that the amount of such additional loss would have a material adverse effect on our financial condition, results of operations or liquidity,” the company said in a Nov. 2 filing with the Securities and Exchange Commission.

UPS, based in Atlanta, disclosed the investigation last year. In a Dec. 31 annual report, UPS said it planned to “vigorously defend” itself.

Mike Mangeot, a UPS spokesman, declined to comment yesterday on the investigation beyond the company’s filings.

2008, 2009

FedEx said in a Sept. 19 filing with the SEC that it responded to grand jury subpoenas in 2008 and 2009.

“We do not believe that we have engaged in any illegal activities and will vigorously defend ourselves in any action that may result from the investigation,” Memphis-based FedEx said in the filing.

Jack Gillund, a spokesman for the U.S. Attorney’s office in San Francisco, said yesterday in an e-mail he couldn’t confirm or deny whether FedEx and UPS are potentially targets of prosecutions.

``Clearly we find the entire investigation to be absurd, and it's something that we are hoping that the Department of Justice and the government overall takes a different approach to and works with us and the industry to find a solution to the problem,'' Patrick Fitzgerald, a FedEx spokesman, said yesterday in a phone interview.

Fitzgerald said the government agencies have refused to provide FedEx with a list of pharmacies engaging in the illegal distribution, preventing the company from prohibiting shipments.

FedEx is asking the justice department to reconsider its investigation and create an industry-wide solution so it can better support the government's efforts, Fitzgerald said.

``Settlement is not an option when there is no illegal activity on our part,'' he said.

The Wall Street Journal reported the investigation earlier.

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