SAN FRANCISCO – A federal grand jury indicted FedEx Corporation, FedEx Express, Inc., and FedEx Corporate Services, Inc., on Thursday for using its shipping services to distribute illegal drugs throughout the country.
Federal authorities claim that FedEx officials knew, as early as 2004, that it was delivering drugs to dealers and addicts. In addition, FedEx had been told by Drug Enforcement Administration, the Food and Drug Administration, members of Congress and their staff that it was delivering narcotics to drug dealers and drug addicts, officials said.
But authorities maintain that FedEx ignored the information from federal officials and Congress.
“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.”
FedEx will make a court appearance on July 29.
If convicted, the corporate defendants face up to 5 years of probation. Authorities are seeking at least $820 million in fines, according to court documents.
FedEx Knew About Illegal Drugs in 2004
Officials said FedEx knew it was delivering drugs to dealers and addicts as early as 2004, the indictment states. Its couriers in Kentucky, Tennessee, and Virginia expressed safety concerns that were circulated to FedEx Senior management.
This included the following concerns:
- FedEx trucks were stopped on the road by online pharmacy customers demanding packages of pills.
- 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.
- Customers were jumping on the FedEx trucks and demanding online pharmacy packages.
- 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, the indictment states.
“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,” said Philip J. Walsky, Acting Director, FDA’s Office of Criminal Investigations. “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.”
FedEx was indicted with conspiracies to traffic in controlled substances and misbranded prescription drugs for its role in distributing controlled substances and prescription drugs for illegal Internet pharmacies, authorities said.
Internet Pharmacies Set Up Shop in 1998
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.
In 2004, FedEx established an Online Pharmacy Credit Policy requiring that all online pharmacy shippers be approved by the Credit Department prior to opening a new account.
The stated reason for this policy was that many Internet pharmacies operated outside federal and state regulations over the sale of controlled drugs and many sites had been shut down by the government without warning, leaving a large balance owed to FedEx.
According to the indictment, FedEx also established a Sales Policy in which all online pharmacies were assigned to a “catchall” classification to protect the commission-based compensation of its sales professionals from the volatility caused by online pharmacies moving shipping locations often to avoid detection by the DEA.
The Chhabra-Smoley Organization and Superior Drugs
The indictment charges that FedEx conspired with the Chhabra-Smoley Organization, from 2000 through 2008, and Superior Drugs Organization, from 2002 through 2010, to violate federal law.
In each of these cases, FedEx is alleged to have conspired to distribute controlled substances and prescription drugs, including Phendimetrazine, Ambien, Phentermine, Diazepam, and Alprazolam 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.
According to the indictment, FedEx began delivering controlled substances and prescription drugs for Internet pharmacies run by Vincent Chhabra, including RxNetwork and USA Prescription, in 2000.
When Chhabra was arrested in December of 2003 for illegally distributing controlled substances based on a doctor’s review of an on-line questionnaire, Robert Smoley took over the organization and continued the illegal distribution of controlled substances and prescription drugs through FedEx.
FedEx and Superior Drugs
According to the indictment, FedEx began delivering controlled substances and prescription drugs for Superior Drugs in 2002.
FedEx’s employees knew that Superior Drugs filled orders for online pharmacies that sold controlled substances and prescription drugs to consumers without the need for a face-to-face meeting with, or physical examination or laboratory tests by, a physician, the indictment alleges.
According to the indictment, FedEx’s employees knew that online pharmacies and fulfillment pharmacies affiliated with both the Chhabra-Smoley organization and Superior Drugs were closed down by state and federal law enforcement agencies and that their owners, operators, pharmacists, and doctors were indicted, arrested and convicted of illegally distributing drugs.
Nevertheless, FedEx continued to deliver controlled substances and prescription drugs for the Chhabra-Smoley organization and Superior Drugs.
The defendants are presumed innocent unless they are proven guilty.