Feds’ Case Against FedEx Crashes and Burns

I and others have repeatedly questioned the U.S. Department of Justice’s adventurous decision to charge Federal Express with crimes for, in essence, refusing to snoop into its customers’ packages and business. From my post at Overlawyered two years ago:

The federal government has prevailed on a grand jury to indict Federal Express for servicing what it should have known were illicit online pharmacy operations. FedEx says it repeatedly asked the government to supply a list of shippers it considered illicit so that it could cut off service, but that the government refused; the Department of Justice contends that circumstantial evidence should have been enough to alert the package shipment company. …

And last month, quoting Washington Legal Foundation’s Cory Andrews:

“Federal prosecutors have accused FedEx of knowingly shipping illegal drugs in interstate commerce and laundering money by merely doing its job: delivering packages (in this case, from online Internet pharmacies) to their intended recipients and getting paid for the service. …To avoid the very sort of ‘gotcha’ prosecution at issue here, Congress inserted exceptions for common carriers in each of the relevant statutes” authorizing shipment of prescription medications and controlled substances when done in the usual course of business….

Now, this big news from federal court in San Francisco:

A criminal trial nearly two years in the making alleging FedEx knowingly delivered illegal prescription drugs to dealers and addicts ended suddenly Friday when prosecutors moved to dismiss all charges against the shipping giant.

U.S. District Court Judge Charles Breyer, who had been highly critical of the government’s positions as the trial unfolded, granted the motion to dismiss: on Friday he called FedEx “factually innocent” and said the withdrawal of charges was “in the court’s view, entirely consistent with the government’s overarching obligation to seek justice even at the expense of some embarrassment.”

FedEx spokesman Patrick Fitzgerald said in a statement Friday that the company has always been innocent and the case should never have been brought.

“The government should take a very hard look at how they made the tremendously poor decision to file these charges,” he said. “Many companies would not have had the courage or the resources to defend themselves against false charges.”

Many in the field of white-collar legal defense have warned large corporations, particularly those with businesses built upon relationships of public trust, to cut a deal with the federal government rather than try to withstand the full force it can bring to bear in a prosecution. But FedEx, for one, has shown that it is still possible to defy the authorities and win. Mike Koehler at FCPA Professor says that might help lay to rest what has been called the “Arthur Andersen effect” in which indictment is itself seen as tantamount to corporate death.

P.S.: Our friend James Copland of the Manhattan Institute has this observation (via email):

What’s remarkable here is that UPS agreed to a $40 million non-prosecution agreement — and to hire a new corporate officer and an independent auditor looking over their shoulder and reporting to the U.S. Attorney — for the same alleged conduct.

(cross-posted from Overlawyered).