July 17 (SAN FRANCISCO, Calif.) - A federal grand jury in
San Francisco indicted FedEx Corporation, FedEx Express, Inc., and FedEx
Corporate Services, Inc., today, 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,
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.
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.
According to the indictment, from at least as early as 2004,
DEA, FDA and members of Congress and their staff informed FedEx 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. 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.
According to the indictment, as early as 2004, FedEx knew
that it was delivering drugs to dealers and addicts. FedEx’s couriers in Kentucky, Tennessee, and
Virginia expressed safety concerns that were circulated to FedEx Senior
management, including that FedEx trucks were stopped on the road by online
pharmacy customers demanding packages of pills, that 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, that customers were
jumping on the FedEx trucks and demanding online pharmacy packages, and that
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.
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.
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.
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.
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 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.”
“Pharmaceutical drug abuse is a serious problem affecting
millions of consumers in the United States,” said DEA Special Agent in Charge
Jay Fitzpatrick. “While DEA is committed
to ensuring patients receive legitimate prescriptions, today’s action should
send a strong message that corporations that participate in illegal activity
risk investigation and prosecution.”
“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 has been summoned to appear in federal court in San
Francisco on July 29, 2014.
An indictment merely alleges that crimes have been
committed, and all defendants are presumed innocent unless and until proven
guilty beyond a reasonable doubt. 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.
Kirstin M. Ault and Kyle F. Waldinger are the Assistant U.S.
Attorneys who are prosecuting the case with the assistance of Maryam Beros and
Rawaty Yim. The prosecution is the
result of a 9-year investigation by the DEA and FDA, Office of Criminal
Investigations.
Click here to view Indictment
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