Justice Dept. case against FedEx collapses mid-trial

Big news from federal court in San Francisco: we’ve repeatedly questioned the U.S. Department of Justice’s adventurous decision to charge Federal Express with crimes for, in essence, refusing to snoop into its customers’ packages and business. From our post two years ago:

The federal government has prevailed on a grand jury to indict Federal Express for servicing what it should have known were illicit online pharmacy operations. FedEx says it repeatedly asked the government to supply a list of shippers it considered illicit so that it could cut off service, but that the government refused; the Department of Justice contends that circumstantial evidence should have been enough to alert the package shipment company. …

And last month, quoting Washington Legal Foundation’s Cory Andrews:

“Federal prosecutors have accused FedEx of knowingly shipping illegal drugs in interstate commerce and laundering money by merely doing its job: delivering packages (in this case, from online Internet pharmacies) to their intended recipients and getting paid for the service. …To avoid the very sort of ‘gotcha’ prosecution at issue here, Congress inserted exceptions for common carriers in each of the relevant statutes” authorizing shipment of prescription medications and controlled substances when done in the usual course of business….

Now, this [Associated Press/ABC News]:

A criminal trial nearly two years in the making alleging FedEx knowingly delivered illegal prescription drugs to dealers and addicts ended suddenly Friday when prosecutors moved to dismiss all charges against the shipping giant.

U.S. District Court Judge Charles Breyer, who had been highly critical of the government’s positions as the trial unfolded, granted the motion to dismiss: on Friday he called FedEx “factually innocent” and said the withdrawal of charges was “in the court’s view, entirely consistent with the government’s overarching obligation to seek justice even at the expense of some embarrassment.”

FedEx spokesman Patrick Fitzgerald said in a statement Friday that the company has always been innocent and the case should never have been brought.

“The government should take a very hard look at how they made the tremendously poor decision to file these charges,” he said. “Many companies would not have had the courage or the resources to defend themselves against false charges.”

Many in the field of white-collar legal defense have warned large corporations, particularly those with businesses built upon relationships of public trust, to cut a deal with the federal government rather than try to withstand the full force it can bring to bear in a prosecution. But FedEx, for one, has shown that it is still possible to defy the authorities and win. Mike Koehler at FCPA Professor says that might help lay to rest what has been called the “Arthur Andersen effect” in which indictment is itself seen as tantamount to corporate death.

P.S.: Our friend James Copland of the Manhattan Institute has this observation (via email):

What’s remarkable here is that UPS agreed to a $40 million non-prosecution agreement — and to hire a new corporate officer and an independent auditor looking over their shoulder and reporting to the U.S. Attorney — for the same alleged conduct.

[cross-posted at Cato at Liberty]

More from Jim Copland and Rafael Mangual at Real Clear Markets: “Judge Breyer observed that the government had failed to show any ill intent, and he pointedly noted that prosecutors have not gone after the U.S. Postal Service for the same conduct…. glad FedEx called the government’s bluff and won.” And: Eugene Volokh; George Leef, Forbes (and thanks for quote).


  • The FedEx lawyer is my sister!!!

  • Good going Peter! In the broadest sense, is she able to let us in on why the Feds decided to pack up and go home?

    • The short answer why the DOJ did not pursue the trial is that Judge Charles Breyer had preconceived misperceptions about the case and how law enforcement is done.

      This whole idea the DEA should have provided a list of “pharmacies” is absurd.

      Law Enforcement relies on the cooperation of communities to prevent crime before it happens and timely citizens action and vigilance to solve crimes which have occurred

      The DEA knew phony pharmacies were shipping drugs but they didn’t know the origins. FedEx Sales and Management were often the first to know of potential problems. When these shipments commenced, FedEx couriers were the next to know the magnitude of the issue.

      This whole idea furthered by people who have no idea what they’re talking about, that FedEx would somehow have to snoop through packages to know there were drugs from these illicit pharmacies is ludicrous.

      • Is this the DEA /DOJ final answer?

  • Rule number three: Never open the package.

    • what’s One and Two?

  • Rules 1&2? See the Transporter for details.

  • I think the difference here is that Fedex really risked none of their normal business even if they had been found to have done something wrong. If a financial company is accused of wrongdoing, they might not be trustworthy to handle your money, so as a customer you’ll pull out or avoid them. If fedex delivered “illegal” viagra… so what. The common person sending a package just isn’t going to care.

    • “I think the difference here is that Fedex really risked none of their normal business even if they had been found to have done something wrong.”

      You’re looking at it backwards. I think a lot of people would have cared if Fedex caved to the government and it became public knowledge that Fedex was snooping into what people are shipping.

  • […] After the stunning collapse of the Department of Justice’s case, will any lessons be learned? [Dan Levine and David Ingram, Reuters; my take earlier] […]