Novel FedEx drug-shipping case left to skeptical judge at trial

Proving to jurors that FedEx Corp. is a criminal because it delivered illegal prescriptions from Internet drug stores was never going to be easy. Convincing a federal judge who questioned the “novel prosecution” may be even tougher.

Federal prosecutors go to trial Monday in U.S. District Judge Charles R. Breyer’s San Francisco courtroom over claims FedEx schemed with online pharmacies to ship an array of painkillers, anxiety meds and diet pills obtained without valid prescriptions.

Breyer, who peppers courtroom colloquies with wit and occasional sarcasm, has heaped extra skepticism on prosecutors, asking why the U.S. Postal Service hadn’t been charged with similar crimes. Pondering the notion that the government-run mail service hadn’t done anything wrong while delivering the same types of drugs at the same time as FedEx, he quipped, “Really?"

The judge, the brother of U.S. Supreme Court Justice Stephen Breyer, has doubted that the government can produce the case’s “essential ingredient" — proof that FedEx knew of the illegal drugs and intended them to be distributed illegally.

While drugstore chains and companies including  United Parcel Service Inc. chose not to fight allegations involving illegal drug sales and deliveries, FedEx faces fines of as much as $1.6 billion if convicted on conspiracy and money laundering charges. While prescription deliveries account for only a small part of its $47.5 billion revenue, it argues it’s the government’s job to let it know which pharmacies operate illegally.

Prosecutors in the San Francisco case, with less than a week before trial, proposed to abandon trying the case before a jury in favor of what they promised will be a speedier, streamlined presentation with Breyer deciding the case himself. A lawyer for FedEx, Cristina Arguedas, consented after what she said was a “two-minute conversation” with her client. Abraham Simmons, a spokesman for the U.S. Attorney’s Office in San Francisco, didn’t respond to requests for comment on the strategy switch.

The judge told prosecutors to hold off on details of shipments and fast forward to evidence that FedEx intentionally engaged in illicit activity.

"He has a sense that this particular issue is going to be the main issue in the trial, and that the government may have a real problem with it," said Tim Crudo, a former federal prosecutor turned defense lawyer.

Until last month, prosecutors were free to paint for jurors their description in court filings of FedEx trucks rolling through Appalachian hamlets in Kentucky, Tennessee and Virginia as addicts clamoring for packages of pills emerged from parking lots, schools and vacant homes. Company managers knew that some drivers faced shake-downs for drugs and that some online pharmacy customers overdosed and died after getting shipments, prosecutors said.

Plans for the trial shifted dramatically at a May 31 hearing when Breyer, over strenuous objection from prosecutors, said the U.S. must start by proving FedEx’s knowledge and intent of wrongdoing.

“And if not,” Breyer said, “the case is terminated from the court’s point of view.”

The judge then gave some strong hints about his thinking.

"I don’t know how they can be charged with the knowledge, as a matter of law, that the prescription was invalid," Breyer said. The prosecution must rely in part on FedEx’s “deliberate ignorance," he surmised.

Breyer’s hands-on re-jiggering of the trial and his threat to cut it short was unusual, especially as he’s known for giving lawyers leeway in how they try their cases, Crudo said. “By ordering it this way — that is an articulation of his skepticism,” he said.

FedEx denies the government’s allegations, arguing doctors and pharmacies are the ones responsible for illegal prescriptions. FedEx also says it helped law enforcement investigate the pharmacies. It said in a court filing that it transported packages only from licensed pharmacies registered with the U.S. Drug Enforcement Agency.

FedEx has asked the DEA for a list of illegal online pharmacies and stands ready to cut off their service, said Patrick Fitzgerald, a company spokesman. The government hasn’t provided a list, he said.

“We view the whole concept of wrongdoing by FedEx as absurd,” he said. "We’re a transportation company but we’re not law enforcement.”

While the government isn’t aiming to imprison anyone at FedEx, it’s “trying to make the point that we can’t just pretend that illegal drugs aren’t being shipped,” said William Portanova, a former federal prosecutor.

UPS agreed in 2013 to forfeit $40 million in payments from illicit online pharmacies under a non-prosecution agreement with the U.S. Justice Department. Walgreen Co. and CVS Caremark Corp. have paid a combined total of more than $150 million in civil fines over claims they sold medications knowing they weren’t for legitimate medical use.

It’s hard to imagine what a guilty verdict against FedEx would mean for the shipping industry, Portanova said. Obligating delivery services to “sniff out what’s happening with their packages” might be too much to ask, he said.

“In a way it’s like prosecuting the post office for delivering mail,” he said.

The case is U.S. v. FedEx Corp., 14-cr-00380, U.S. District Court, Northern District of California (San Francisco).