by Serina M. Vash

It happens all the time in criminal trials: the case ends after opening statements.  Ordinarily, after a powerful opening statement by the government, reality sets in for the defendant.  The defendant changes course and pleads guilty, hoping that he can still reduce his sentence under the Federal Sentencing Guidelines.

But the turn of events in the FedEx Case is unprecedented.  After marching an eight year federal criminal investigation to trial, the U.S. Attorney’s Office for the Northern District of California dismissed its criminal case against FedEx shortly after opening statements and the district court judge declared that FedEx was “factually innocent.”

So what happened in the drug trafficking case against FedEx?

As a former federal prosecutor, I followed the FedEx case closely.  The unconventional drug trafficking case against FedEx seemed a fascinating test case for the prevailing proposition that corporate criminal defendants cannot risk taking cases to trial.

This is a Job for FedEx®

In July 2014, the government indicted FedEx for conspiring to distribute controlled substances, alleging that FedEx knowingly helped Internet pharmacies ship pills without valid prescriptions.  The indictment was superseded in August of the same year to include three counts of money laundering.  According to the government, although a small number of internet pharmacies operated legally, the overwhelming majority of Internet pharmacies operated illegally by dispensing controlled substances without a valid prescription.  The government alleged that FedEx was aware that illegal Internet pharmacies were using their shipping services and that FedEx nevertheless continued to do business with them.  According to the government’s trial brief, “The only issue [was] whether FedEx knew and intended that it was delivering drugs for these organizations outside the usual course of professional practice and not for a legitimate medical purpose.”

Most corporate criminal defendants would not have risked going to trial.  But FedEx, as a common carrier that delivers 4 million packages a day, had an arguably righteous position.  Importantly, one they believed in.  While FedEx is in the business of delivering packages, the government is in the law enforcement business; it’s the government’s job to learn when contraband is being shipped.  This argument was one that counsel for the defense could argue justly at trial – wrapping itself in the same American flag that stands guard in every courtroom, quietly nodding to the prosecution throughout trial.  Most importantly, FedEx had deep pockets – they had the means and the stamina to put the government to its burden.

This was a case for trial.  “This is a Job for FedEx.”®

Relax, It’s FedEx®

From the beginning of the case, FedEx maintained its innocence and was committed to clearing its name.  The company sought a Bill of Particulars in December 2014 – seeking names of the FedEx employees who allegedly knew the true contents of the packages.  In January 2015, FedEx issued numerous subpoenas explicitly asking for the names and notes of federal agents who had met with FedEx employees during the time frame of the alleged conspiracy, in what FedEx asserted was a cooperative effort to address concerns about shipments of illegal prescriptions with the government.

In May 2015, FedEx unsuccessfully moved to dismiss the case pursuant to common carrier exemptions.  All the while, FedEx vehemently denied the allegations and promised to defeat them at trial if necessary.  So the case proceeded to trial.  But – Relax, it’s FedEx.®

Be Absolutely Sure®

Then came the bombshell opening statement of the FedEx defense team.   According to its defense team, FedEx had assisted the DEA in some of the arrests at issue and had been cooperating with the government, promising to cut off service to illegal online pharmacies identified by the DEA. It’s not pretty when the defendant’s key witnesses turn out to be two former chiefs of the DEA’s Pharmaceutical Investigations Section.

If there is a witness that may not support your case or a question that you hesitate to ask – that’s the witness you MUST be prepared for; that’s the question that you MUST ask. Because when the standard is “beyond a reasonable doubt,” the government must “Be Absolutely Sure”® both that the defendant is in fact guilty and that guilt can proven beyond a reasonable doubt.

Within days of opening statements and with some insight into what the defense witnesses would testify to, the government dismissed its case.  It appears that the information FedEx had requested earlier in the case was the very information that undermined the government’s allegations.

The Way the World Works®

So why did FedEx go to trial when the overwhelming majority of corporate criminal defendants do not risk it?

In hindsight, it would be easy to say that FedEx went to trial because they believed that they were not guilty. Unfortunately that’s not “The Way the World Works”® for all corporate criminal defendants.  Many companies believe they have valid defenses and good odds at trial, but still resolve allegations of corporate misconduct rather than go to trial.  At the end of the day, companies need to stay in business.  They need to survive allegations of corporate misconduct, whatever a full treatment of the facts would reveal.  Thus, many corporate criminal defendants opt not to gamble with their lives.  The unintended result: the government is rarely held to its burden in corporate criminal cases.

In Refusing to Settle: Why Public Companies Go to Trial in Federal Criminal Cases (PDF: 101 KB), F. Joseph Warin and Julie Rapoport Schenker explore some of the reasons a public company would risk going to trial: ambiguity of the law, a complex legal scheme, evidentiary problems, preservation of reputation, and yes, lack of blameworthiness.  All of these issues appear to have played a role in FedEx’s decision to go to trial.

 It’s Not Just a Package, It’s Your Business.®

Fed Ex is a household name with an otherwise sterling reputation.  Drug trafficking and money laundering convictions would have undermined the very integrity of the company.  In the end, FedEx’s decision to go to trial protected and preserved its reputation.  FedEx has been named one of the world’s most reputable companies by the Reputation Institute for several years running and there is a return on reputation.  As FedEx knows well, “It’s not just a package, it’s your business.”®

Absolutely, Positively Anytime®

Eight years have elapsed from the beginning of the investigation until the government’s dismissal several weeks back.  For eight years, “Absolutely, Positively Anytime”® FedEx delivered a package, the shadow of the drug trafficking investigation and prosecution followed.

But dismissal of the case demonstrates that that the government’s job also remains absolute: Do the right thing, for the right reason, always.   Absolutely, positively, every time.  That’s what the U.S. Attorney’s Office did when it dismissed the case.  And, that’s what U.S. Attorney Brian Stretch is doing with the announcement that his office will begin an internal investigation into why prosecutors brought the case against FedEx in the first place, what supervisory oversight prosecutors received and what role, if any, Main Justice officials played in the case.

We Live to Deliver®

So the FedEx case remains an important test case for corporate criminal defendants.  While digging in and asking hard questions about what went wrong won’t be easy, this is a critical opportunity for the government to illuminate for prosecutors, law enforcement agents, defense lawyers and corporations alike how to proceed in the face of suspected corporate misconduct.

Today, FedEx has been vindicated.  Not every company that stands accused of criminal misconduct can stand as strong, for as long, as FedEx did.

By choosing to go to trial and put the government to its burden, FedEx can faithfully tell its customers: “We Live to Deliver”® another day.

Serina M. Vash is the Executive Director of the Program on Corporate Compliance and Enforcement and is a former Deputy of the Criminal Division in the United States Attorney’s Office for the District of New Jersey.

Trademark Disclaimer

The above post contains slogans trademarked by Federal Express Corporation.
“Federal Express Corporation”. trademarkia.com. Trademarkia. 

Disclaimer

The views, opinions and positions expressed within all posts are those of the author alone and do not represent those of the Program on Corporate Compliance and Enforcement or of New York University School of Law.  The accuracy, completeness and validity of any statements made within this article are not guaranteed.  We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.