FEDEX Indicted by Federal Grand Jury for Supplying Shipping Services to Fake Online Pharmacies
A nine-year investigation has culminated in indictments of FedEx companies for conspiracies to traffic in controlled substances and misbranded prescription drugs associated with illegal Internet pharmacies. Although warned by Congress as early as 2004, the FEDEX Corporation allegedly continued to act as a delivery service for fake online pharmacies, and established specialized policies for doing business with them. After a Grand Jury hearing, FEDEX now faces upwards of $820 million in fines for their alleged role as a fake online pharmacy courier.
A San Francisco Grand Jury has handed down indictments of FEDEX and its associated corporations for their alleged facilitation of fake online pharmacy deliveries, reports the Department of Justice (DOJ). According to the DOJ, FEDEX has been indicted on charges that it conspired to traffic in controlled substances and misbranded prescription drugs, and for its role in distributing controlled substances and prescription drugs for fake online pharmacy clients.
The indictments alleged that FEDEX established specific policies for doing business with fake online pharmacies. The DOJ alleges, “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… 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.”
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The indictment alleges that FEDEX management was operating with complete disregard for Federal law. A 2006 letter circulated to all Managing Directors of Sales explained why the Online Pharmacy Credit Policy was so important: “Many of these companies operate outside federal and state regulations over the sale of controlled drugs, which require diagnosis and prescription from a licensed physician. Drugs purchased from these sites may be diluted or counterfeit. Several sites have been shut down by the government without warning or simply disappeared leaving large balances owing to FEDEX.”
The indictment cites two specific businesses for whom FEDEX allegedly provided delivery services. The first was a group of Internet pharmacies operated by Vincent Chhabra and Robert Smoley who operated online pharmacies such as RxNetwork and USA Prescription. Chhabra pleaded guilty to conspiracy to distribute controlled substances in 2004, according the Food and Drug Administration (FDA). When Chhabra pleaded guilty, Smoley took over operations, with FEDEX allegedly continuing its delivery services as before.
FEDEX also allegedly provided delivery services for Superior Drugs, and several other identified black market pharmacies such as Genetechnica, Physicians Online Network, The Spence Group, Pharmacom, SaveOn RX, Carmel Management, SafeScriptsOnline, and Affpower.
In 2007, the Department of Justice indicted 18 people associated with Affpower, including Nathan Jacobson, for their involvement with the fake online pharmacy business. Jacobson was a fugitive after his guilty plea in 2008, and extradited from Canada in 2013 to face U.S. justice, reports CTV News Canada.
If convicted, the defendants face a maximum sentence of 5 years of probation, and a fine of between $1 million and $2.5 million, or twice the gross gain derived from the offense, which, according to the indictment, will be at least $820 million. The defendants are also liable for any restitution to victims of the crime, as well as forfeiture of the gross proceeds of the offense and any facilitating property.
Kirstin M. Ault and Kyle F. Waldinger are the Assistant U.S. Attorneys that are prosecuting this case with assistance from Maryam Beros and Rawaty Yim.