FedEx conspired to traffic in controlled substances and misbranded prescription medications by helping distribute drugs for illegal Internet pharmacies, an indictment from a federal grand jury in San Francisco alleges.

The shipping company knew as early as 2004 that it was delivering drugs to dealers and addicts, Thursday’s indictment says.

The indictment accuses FedEx of conspiring with two related online pharmacy companies -- the Chhabra-Smoley Organization from 2000 through 2008 and Superior Drugs from 2002 through 2010 -- to distribute sleep aid Ambien, appetite suppressant phendimetrazine and other drugs to people with invalid prescriptions.

The shipping company pushed back against the allegations, saying it would plead not guilty and accusing the Justice Department of threatening to compromise its customers’ privacy.


“FedEx is innocent of the charges brought today,” Patrick Fitzgerald, senior vice president of marketing and communications, said in a statement.

“We have repeatedly requested that the government provide us a list of online pharmacies engaging in illegal activity,” he said. “Whenever [the Drug Enforcement Administration] 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.”

The indictment contends that FedEx was aware many online pharmacies were running afoul of the law and tried to protect itself financially by requiring the pharmacies to submit a security deposit or bank letter of credit.

The indictment quoted a company memo from 2006 that said the policy was important because “many of these companies operate outside federal and state regulations over the sale of controlled drugs…. Several sites have been shut down by the government without warning or simply disappeared leaving large balances owed to FedEx.”


FedEx has been summoned to appear in court July 29.

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

In March 2013, UPS agreed to pay $40 million to settle a similar case with the U.S. attorney’s office.

FedEx, based in Memphis, says it transports more than 10 million packages a day.


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