FedEx Beats U.S. Case Over Illegal Online Drug Shipments

  • Trial cut short over insufficient proof of wrongdoing
  • U.S. drops charges carrying potential $1.6 billion in fines

Charges that FedEx Corp. intentionally shipped illegal online prescriptions were thrown out at the request of federal prosecutors, ending a trial and killing conspiracy and money laundering counts that carried as much as $1.6 billion in fines.

The unusual decision to drop the two-year-old case abruptly during trial, before FedEx even put on its defense, marks a vindication for the package-delivery company, which maintained its innocence and said it helped law enforcement investigate pharmacies suspected of selling drugs illegally. FedEx opted for a trial after drugstore chains and companies including United Parcel Service Inc. chose not to fight allegations involving illegal drug sales and deliveries.

“The case should never have been brought,” Cristina Arguedas, a lawyer for FedEx, said Friday.“The dismissal today is an acknowledgment that there was no wrongdoing by FedEx.”

U.S. District Judge Charles R. Breyer in San Francisco had voiced skepticism about the case, calling it a “novel” prosecution and raising doubts before trial that the government could produce the “essential ingredient" -- proof that FedEx knew of the illegal drugs and intended them to be distributed illegally. With less than a week before trial, prosecutors abandoned trying the case before a jury and opted instead to streamline their presentation of evidence and have Breyer decide the case himself. FedEx agreed.

Breyer had requested testimony by two Drug Enforcement Agency officers about details of their investigation. On Friday as he was preparing to hear that evidence and consider FedEx’s motion to throw out the case, a prosecutor asked that it be dropped.

"After reviewing the evidence in the case, we move to dismiss the charges,” Assistant U.S. Attorney John Hemann told Breyer. Hemann declined to comment on the decision.

‘Some Embarrassment’

Breyer said in court he had never seen anything like it.

“The defense was factually innocent and did not have intent,” Breyer said in court. “The act of dismissal is entirely consistent with government’s overarching obligations to seek justice, even at the cost of some embarrassment.”

The judge signed and filed his order dismissing the case minutes later.

While prescription deliveries account for only a small part of FedEx’s $47.5 billion annual revenue, the company argued it’s the government’s job to let it know which pharmacies operate illegally. FedEx has said it would cease shipping package to or from those pharmacies.

Overdoses, Deaths

At trial, the government said it would use dozens of company e-mails to show that FedEx managers knew some drivers faced shakedowns for drugs and that some online pharmacy customers overdosed and died after getting shipments.

Breyer had directed prosecutors to begin the trial by putting on evidence of FedEx’s knowledge and intent of wrongdoing and warned that he would terminate the case if the proof wasn’t sufficient.

“The government should take a very hard look at how they made the tremendously poor decision to file these charges,” Arguedas said Friday. “The power of the government was greatly misused when this case was brought, but the integrity of the government was redeemed with the decision to dismiss the charges today."

UPS agreed in 2013 to forfeit $40 million in payments from illicit online pharmacies under a non-prosecution agreement with the U.S. Justice Department. Walgreen Co. and CVS Caremark Corp. have paid a combined total of more than $150 million in civil fines over claims they sold medications knowing they weren’t for legitimate medical use.

The case is U.S. v. FedEx Corp., 14-cr-00380, U.S. District Court, Northern District of California (San Francisco).

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