Is FedEx a drug trafficker? Charges lift lid on drugs-through-mail pipeline.

Global package deliverer FedEx is facing $1.6 billion in possible fines after a federal grand jury in San Francisco handed down an indictment Thursday for drug trafficking, alleging that the company knowingly delivered illicit pharmaceuticals for over a decade to customers around the US.

Memphis, Tenn.-based FedEx has vehemently denied the allegations ahead of a July 29 court hearing in San Francisco, saying the government never gave it specific information about which companies were shipping illegally obtained pharmaceuticals.

According to the indictment, however, FedEx ignored warnings from the Drug Enforcement Administration and others for more than a decade that it was shipping such substances.

But even as details emerge about an alleged scheme in which FedEx is said to have extended credit to shady online pharmacies, the Justice Department charges have also lifted the lid on a long-running reality underscored by the late comedian Mitch Hedberg, who once joked that, “I love my FedEx guy ‘cause he’s a drug-dealer and he doesn’t even know it.”

With recreational marijuana now legal in two US states – Washington and Colorado – and 23 other states allowing medical marijuana, the US mail and private carriers like FedEx have been seeing increased amounts of illicit substances coursing through a system that processes more than half a billion pieces of mail a day.

The issue is a major sticking point in the battle between federal and state authorities over legalized marijuana, which is still classified by federal authorities as a potent narcotic with no medical benefit. In response to the legalization of pot in Colorado, the Justice Department last year directed federal prosecutors to focus their efforts at making sure marijuana grown in those states isn’t being diverted to states where the drug is illegal.

Indeed, federal investigators who say FedEx has been knowingly delivering illicit prescription medications – to the tune of $820 million in profit, prosecutors say – don't know how much illegal stuff moves through private package delivery networks, but they do know it's a whole bunch.

“You can bet your bottom dollar that Colorado is probably shipping a ton of stuff, and as a result Washington is watching all avenues coming out of there,” says Finn Selander, a retired DEA special agent and now a member of LEAP, Law Enforcement Against Prohibition, who works to end marijuana prohibition in order to defuse a vast and sometimes dangerous black market.

“What you don’t realize, and what’s a big part of this puzzle, is that medical marijuana is very expensive, and the demand out there is huge, which means there’s still a huge, huge, huge black market” of pot grown legally for medical use that is being diverted to the national black market for pot.

There are other factors playing into what Mr. Selander believes is a major movement of illicit drugs through the mail. A decade ago, companies like FedEx worked with federal drug agents, allowing agents to borrow trucks and clothing in order to bust recipients at their homes. (Agents used an electronic beacon that went off when the package was opened inside the home.) But that cooperation ended, he says, as safety concerns rose about drivers, who work alone, being targeted as snitches or police informants.

One sign of an intensifying mail trade in illicit substances is the number of arrests, which rose by 33 percent between 2011 and 2012, to 1,760 arrests. That number is twice the number of drugs-through-the-mail arrests that took place in 2008.

Walt Green, the acting US attorney for the Middle District of Louisiana, told the Baton Rouge Advocate last year that law enforcement is seeing growing numbers of illicit packages being sent through the mails, though he couldn’t peg a cause. Most of the marijuana found is coming from California – the nation’s premier medical marijuana state.

According to 2012 testimony in federal court by former US Customs Inspector Jamie Haase, using FedEx and other services like the US Postal Service’s Express Mail feature is a “win-win” for drug traffickers because “only a small percentage of cargo is getting flagged for inspection.”

Among delivery drivers, the drugs-through-the-mail pipeline is an open secret. On BrownCafe, an unofficial UPS blog, delivery drivers reminisced recently about the drug trade.

“I have personally witnessed 50 lb. boxes filled with cocaine, many boxes and envelopes full of grass and hashish, and other illicit drugs,” a commenter known as “Mr. FedEx” wrote on BrownCafe.

The issue is complicated for mail carriers like FedEx, which, by policy at least, contact law enforcement officials when they find suspicious packages. (Most of the company’s security measures, however, are aimed at making sure bombs don’t make it into the pipeline.) The sheer volume of packages, for one, makes any effort at finding which packages have pot or cocaine in them a needle-in-haystack scenario. What’s more, packages are often addressed to fictitious names and have incorrect phone numbers attached to them, meaning it’s difficult to tie them to the recipient.

But federal authorities say the shipping of illicit pharmaceuticals became a problem because “FedEx knew that it was delivering drugs to dealers and addicts," the Justice Department said in a press release.

Interestingly, UPS settled a similar case with the Department of Justice last year for $40 million, but FedEx has refused to settle in this case because company executives do not believe the firm has done anything wrong.

On Thursday, FedEx spokesman Patrick Fitzgerald said in a written statement that his company can’t be held liable for the legality of what’s in some 10 million packages it delivers every day to stoops and front desks. “We are a transportation company – we are not law enforcement,” Mr. Fitzgerald said.