FedEx Indicted for Its Role in Drug Distribution

SAN FRANCISCO, CALIFORNIA — A federal grand jury in San Francisco has indicted FedEx Corp., FedEx Express Inc., and FedEx Corporate Services Inc., for their role in distributing controlled substances and prescription drugs for illegal Internet pharmacies, announced U.S. Attorney Melinda Haag, Drug Enforcement Administration agent Jay Fitzpatrick, and Food and Drug Administration official Philip J. Walsky.

According to the indictment, beginning in approximately 1998, Internet pharmacies began offering consumers prescription drugs, including controlled substances, based on the provision of information over the Internet. While some Internet pharmacies were managed by well-known pharmacy chains that required valid prescriptions and visits to the patient’s personal physician, others failed to require a prescription before filling orders for controlled substances and prescription drugs. Rather, these Internet pharmacies filled orders based solely on the completion of an online questionnaire, without a physical examination, diagnosis, or face-to-face meeting with a physician. Such practices violated federal and state laws governing the distribution of prescription drugs and controlled substances.

According to the indictment, from at least as early as 2004, DEA, FDA and members of Congress and their staff 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, the Food, Drug and Cosmetic Act, and numerous state laws.

According to the indictment, as early as 2004, FedEx knew that it was delivering drugs to dealers and addicts. FedEx couriers in Kentucky, Tennessee, and Virginia expressed safety concerns that were circulated to FedEx senior management, including 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 carloads 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. In response to these concerns, FedEx adopted a procedure whereby Internet pharmacy packages from problematic shippers were held for pick up at specific stations rather than delivered to the recipient’s address.

FedEx is charged with conspiring with two separate but related Internet pharmacy organizations: the Chhabra-Smoley Organization, from 2000 through 2008, and Superior Drugs, from 2002 through 2010. In each case, FedEx is alleged to have knowingly and intentionally conspired to distribute controlled substances and prescription drugs to customers based on invalid prescriptions issued by doctors who were acting outside the usual course of professional practice.

“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,” said U.S. Attorney Melinda Haag. “This indictment highlights the importance of holding corporations that knowingly enable illegal activity responsible for their role in aiding criminal behavior.”

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.  If convicted, the defendants face a maximum sentence of five years of probation, and a fine of up to $2.5 million, or twice the gross gain derived from the offense, alleged in the indictment to be at least $820 million. The defendants are also liable for restitution to victims of the crime, as well as forfeiture of the gross proceeds of the offense and any facilitating property.

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