The recent indictment of FedEx for transporting pharmaceuticals from illegal online pharmacies has caused a lot of controversy.

The Justice Department claims in a statement that FedEx continued to deliver controlled substances and prescription drugs for Chhabra-Smoley and Superior Drugs even though FedEx employees knew that online pharmacies and fulfillment pharmacies affiliated with Chhabra-Smoley and Superior Drugs were closed down by law enforcement and owners, operators, pharmacists and doctors were indicted, arrested and convicted of illegally distributing drugs, according to a statement from federal prosecutors.

In addition, FedEx allegedly conspired to distribute controlled substances and prescription drugs, including Phendimetrazine (Schedule III); Ambien, Phentermine, Diazepam, and Alprazolam (Schedule IV), to customers “who had no legitimate medical need for them based on invalid prescriptions issued by doctors who were acting outside the usual course of professional practice,” the statement said.



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A federal grand jury in San Francisco indicted FedEx for conspiracy to traffic in controlled substances and misbranded prescription drugs.

“The advent of Internet pharmacies allowed the cheap and easy distribution of massive amounts of illegal prescription drugs to every corner of the United States, while allowing perpetrators to conceal their identities through the anonymity the Internet provides,” U.S. Attorney Melinda Haag said in the statement. “This indictment highlights the importance of holding corporations that knowingly enable illegal activity responsible for their role in aiding criminal behavior.”

For its part, FedEx issued a statement pointing out that the company “repeatedly” asked the federal government to provide “a list of online pharmacies engaging in illegal activity.  Whenever DEA provides us a list of pharmacies engaging in illegal activity, we will turn off shipping for those companies immediately. So far the government has declined to provide such a list,” the statement said.

In addition, the government’s actions put customers’ “privacy” at risk, the statement adds.

“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,” the statement continued.

When reviewing the indictment, two attorneys in private practice, not connected with the case, suspect there was a long period of high-level negotiations between the company and government officials on how to resolve the issues.

“The indictment is not going to be a surprise for Federal Express,” Jaime Guerrero, an attorney at Foley & Lardner LLP, who previously worked as an auditor for Deloitte & Touche, told InsideCounsel in an interview.

Sergio Acosta, a litigation attorney with Hinshaw & Culbertson, who was formerly chief of the General Crimes Section of the Criminal Division of the U.S. Attorney’s Office for the Northern District of Illinois, also predicted in an interview, “there will be a lot of litigation before a case like this ever goes to trial.”

Eventually, a case could be brought to federal appeals court or maybe even the Supreme Court, he adds.

Meanwhile, the government appears confident there were FedEx employees who were aware of what pharmacies were doing, but they still went forward with the deliveries.

Acosta added that it is likely that the case was authorized by the highest levels of the U.S. Justice Department, not just a local U.S. Attorney’s office, because it involves a large company like FedEx.

“The Department of Justice is trying to send a message to private courier companies,” Acosta said.

Also, by FedEx issuing statements saying that privacy is at risk, and questioning the government’s intrusiveness, it is coming up with a “smart” public relations approach, Acosta adds.

“It’s a very good argument,” Guerrero said. But he adds “the right of privacy only goes so far.”

Guerrero speculates that FedEx may try to argue that upper management at the company was not aware of what was going on. The company may try to argue rogue employees were involved, but upper management simply did not know about the situation.

The resolution of the case may also focus on what did the Drug Enforcement Administration (DEA), Food and Drug Administration (FDA) and other federal officials tell FedEx and who at the company knew about it. One key question is: did the general counsel, CEO or board members know about it?

Starting in 2004, the DEA, FDA and members of Congress and their staffs informed FedEx that illegal Internet pharmacies were using its shipping services to distribute controlled substances and prescription drugs in violation of the Controlled Substances Act (CSA), Food, Drug and Cosmetic Act (FDCA), and numerous state laws, according to the statement from the Justice Department.

And as early as 2004, “FedEx knew that it was delivering drugs to dealers and addicts,” the statement adds.

For instance, senior managers at Federal Express were told by FedEx’s couriers in Kentucky, Tennessee, and Virginia that FedEx trucks “were stopped on the road by online pharmacy customers demanding packages of pills, that the delivery address was a parking lot, school, or vacant home where several car loads of people were waiting for the FedEx driver to arrive with their drugs, that customers were jumping on the FedEx trucks and demanding online pharmacy packages, and that FedEx drivers were threatened if they insisted on delivering packages to the addresses instead of giving the packages to customers who demanded them.”

FedEx then set up a procedure where Internet pharmacy packages were held for pick up at specific stations.

“Illegal Internet pharmacies rely on illicit Internet shipping and distribution practices. Without intermediaries, the online pharmacies that sell counterfeit and other illegal drugs are limited in the harm they can do to consumers,” Philip J. Walsky, acting director, FDA’s Office of Criminal Investigations, said in the statement. “The FDA is hopeful that today’s action will continue to reinforce the message that the public’s health takes priority over a company’s profits.”