FedEx is facing drug-trafficking charges after a federal grand jury in San Francisco indicted the overnight shipping company, accusing it of conspiring to deliver prescription drugs for illegal Internet pharmacies.
The indictment says FedEx knew for a decade that such pharmacies used their services. FedEx took steps to protect its business by setting up special credit policies for Internet pharmacies so it wouldn't lose money if police shut the sites down, the indictment says.
FedEx ignored nearly a decade of warnings from the Drug Enforcement Administration, the Food and Drug Administration and members of Congress, the indictment says.
"FedEx knew that it was delivering drugs to dealers and addicts," the Justice Department said in a press release.
Federal prosecutors have summoned FedEx to federal court in San Francisco for a hearing July 29.
No FedEx officers were charges.
FedEx is innocent of the charges, said Patrick Fitzgerald, senior vice president for marketing and communications, in a written statement. Fitzgerald said FedEx has cooperated for decades with law enforcement agencies to stop illegal drug activity.
"We have repeatedly requested that the government provide us a list of online pharmacies engaging in illegal activity," he said. "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."
Fitzgerald said it is unreasonable to expect FedEx to take responsibility for the legality of the contents of the 10 million packages it delivers each day.
"We are a transportation company — we are not law enforcement," he said.
FedEx's couriers in Kentucky, Tennessee and Virginia told senior FedEx managers that they worried for their safety. Delivery addresses for the pills included parking lots, schools and vacant homes where carloads of people would await the parcels, the indictment said.
"FedEx trucks had been stopped on the road by Internet pharmacy customers demanding packages of pills," it said.
The illegitimate Internet pharmacies that emerged on the Web starting in 1998 required that patients do little more than fill out a questionnaire describing an ache or pain to get an online prescription.
Prosecutors say officials of the DEA and FDA and members of Congress warned FedEx at least six times since 2004 that illegal Internet pharmacies used the global shipper to deliver drugs.
The indictment says FedEx knowingly shipped drugs for two illegal Internet pharmacies, the Chhabra-Smoley Organization and Superior Drugs. In 2003, the DEA shut down RxNetwork, one of the Chhabra-Smoley businesses, and arrested Vincent Chhabra on charges of violating the Controlled Substances Act.
"FedEx learned of these events promptly after they occurred," the indictment says, but the shipper continued to deliver for other businesses run by the same group.
The credit policy, circulated to FedEx directors on July 6, 2006, and included in the indictment, explained the policy's rationale: "Many of these companies operate outside federal and state regulations over the sale of controlled drugs. ... Drugs purchased from these sites may be diluted or counterfeit. Several sites have been shut down by the government without warning or simply disappeared, leaving large balances owing to FedEx."