By H. Nelson Goodson
July 29, 2014
San Francisco, California - On Tuesday, FedEx Corporation, Inc. is scheduled to face a multiple count federal indictment in the U.S. District Court for the Northern District of California resulting from a nine year investigation for distributing illegal drugs ordered from Internet pharmacies. The federal 15-count indictment charged FedEx with 1-count for conspiracy to distribute controlled substances; 9-counts for distribution of controlled substances; 1-count for conspiring to distribute misbranded drugs in Interstate Commerce; 1-count for conspiring to distribute controlled substances; 2-counts for distribution of controlled substances; and 1-count for conspiracy to distribute misbranded drugs in Interstate Commerce. FedEx Corporation, Inc. could face a forfeiture of more than $820 million, if found guilty on all counts and restitution to victims, as well. Corporate individuals are also facing up to five years in prison, if convicted, according to the indictment.
On July 17, a federal 15-count indictment was filed in Northern California alleging that FedEx Corporation, Inc. and two of its subsidiaries, FedEx Express, Inc. and FedEx Corporate Services, Inc. conspired to distribute controlled substances and misbranded prescription drugs for Internet Pharmacies and did nothing, except profiting from the deliveries, according to a federal indictment. For 15 years, FedEx Corporation, Inc. two of it subsidiaries conspired to traffic in controlled substances and misbranded prescription drugs for its role in distributing controlled substances and prescription drugs for illegal Internet pharmacies, announced United States Attorney Melinda Haag, Drug Enforcement Administration (DEA) Special Agent in Charge Jay Fitzpatrick, and Food and Drug Administration (FDA) Acting Director of the Office of Criminal Investigations Philip J. Walsky.
The news release by U.S. Attorney Haag states that "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."
As early as 2004, FedEx was notified by the DEA, FDA and members of Congress that illegal Internet pharmacies were using its shipping services to distribute controlled substances and prescription drugs in violation of the Controlled Substances Act (CSA), Food, Drug and Cosmetic Act (FDCA), and numerous state laws. FedEx then implemented a "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."
Sales FedEx employees were expected to excel their previous year sales and if they lost an account, they were expected to immediately acquire another to replace the loses. The Pharmacy credit policy that FedEx implemented was to secure payments and gained profits, just in case a pharmacy was shutdown by the feds.
"FedEx is charged in the indictment 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, including Phendimetrazine (Schedule III); Ambien, Phentermine, Diazepam, and Alprazolam (Schedule IV), 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. The indictment charges that FedEx conspired with these organizations to violate the CSA, 21 U.S.C. §§ 841, 846, and the FDCA, 21 U.S.C. §§ 331, et seq."
"FedEx is charged in the indictment 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, including Phendimetrazine (Schedule III); Ambien, Phentermine, Diazepam, and Alprazolam (Schedule IV), 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. The indictment charges that FedEx conspired with these organizations to violate the CSA, 21 U.S.C. §§ 841, 846, and the FDCA, 21 U.S.C. §§ 331, et seq."
Also, "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 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."
"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."
If convicted, the defendants face a maximum sentence of 5 years of probation, and a fine of between $1 and 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. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553, according to the news release.
FedEx Corporation, Inc. federal indictment (PDF) at link: http://1.usa.gov/1nChXww
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