Drug trafficking allegations against FedEx head to trial

SAN FRANCISCO -- Two giants -- the U.S. government and FedEx -- are set to do battle in a federal court over the claim the shipping company knowingly delivered illegal prescription drugs such as Ambien from pill mills to dealers and addicts, some of whom died.

Fedex has denied the charges and says it only shipped what it believed were legal drugs from licensed pharmacies. Opening statements are scheduled to start today.

The trial -- nearly two-years in the making -- is unusual for the government's decision to bring drug charges against a package-delivery company and the lack of a settlement.

Rival UPS Inc. paid $40 million in 2013 to resolve similar allegations that arose from a yearslong government crackdown on internet pharmacies that ship drugs to customers without valid prescriptions.

The stakes are high for Memphis, Tennessee-based FedEx. Though no FedEx officials face prison time, the charges carry a potential fine of $1.6 billion.

"It's incredibly rare for there to be any trial in the prosecution of a corporation," said Brandon Garrett, a professor at the University of Virginia School of Law who studies corporate crime. "Many large corporations like Fedex have received deferred or non-prosecution deals where they avoid an indictment all together."

Prosecutors say starting in 2000, FedEx conspired with two internet pharmacy organizations to ship powerful sleep aids, sedatives, painkillers and other drugs to customers who had not been examined physically by a doctor. FedEx continued to ship drugs from the pharmacy groups even as law-enforcement officials shut down some of their affiliates, prosecutors allege.

The crux of the government's case is FedEx knew the drugs were illegal and headed for dealers and addicts but delivered them anyway.

The company's drivers expressed safety concerns FedEx trucks were being stopped on the road by online-pharmacy customers demanding packages of pills, and the delivery address was a parking lot, school, or vacant home where several carloads of people were waiting for their drugs, according to the federal prosecutor's office.

Federal law-enforcement officials told FedEx as early as 2004 illegal internet pharmacies were using its delivery services for prescription drugs, and company employees noted internet pharmacies for which the company continued to deliver were linked to ones law enforcement shut down, prosecutors said.

FedEx says the pharmacies were licensed by state boards of pharmacy and registered with the U.S. Drug Enforcement Administration, which allowed them to continue operating. To the best of FedEx's knowledge, they were supplying legal medications, said Patrick Fitzgerald, FedEx's senior vice president for marketing and communications.

"That's why we find the whole concept of this case to be absurd," he said Friday. "If there's illegal activity by any of these pharmacies, we very much want to know about that activity so we can stop it."

FedEx's legal team includes Cristina Arguedas and Allen Ruby, who also represented slugger Barry Bonds in his perjury trial over alleged steroids use. Arguedas' office in court documents said FedEx assisted authorities in the investigation of online pharmacies with the understanding law-enforcement officials would determine whether the pharmacies were legal. Arguedas has said the U.S. Postal Service handled the same types of online pharmacy packages as FedEx, and two DEA officials who regularly talked to FedEx have said they never told the company to stop shipping for any online pharmacies.

The trial, which is scheduled to go into August, is not before a jury after FedEx agreed to have Senior U.S. District Court Judge Charles Breyer decide the case.