Serina Vash on FedEx and Taking the Government to Trial

Rarely do you see a major American corporation take the government to trial in a criminal case.

But FedEx took the Department of Justice to trial — and won.

Serina Vash

As a former federal prosecutor, Serina Vash followed the case closely.

Vash is the executive director of the NYU Program on Corporate Compliance and Enforcement.

Before joining NYU, Vash served for twelve years in the United States Attorney’s Office for the District of New Jersey.

“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,” Vash wrote last year. “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.”

“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.”

“Then came the bombshell opening statement of the FedEx defense team,” Vash relates.  “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.”

“Within days of opening statements and with some insight into what the defense witnesses would testify to, the government dismissed its case.”

“From the very beginning, FedEx proclaimed its innocence and said they were going to challenge the government,” Vash told Corporate Crime Reporter in an interview last week. “Irrespective of whether or not a company believes they have a righteous defense, it’s often too costly in terms of money, reputation and impact. It’s so costly that the question becomes — is the company pleading or entering into an agreement with the government because they know they are guilty or are they doing it because the risk of putting up a defense is too great?”

“Because the company is in the business of delivering packages, their reputation is critically important to them, as it is with all companies. This type of accusation — that the company was a drug dealer — was problematic. And the company indicated they were going to challenge the government and fight the case. And they did just that.”

Vash reports that FedEx was named one of the most reputable corporations by the Reputation Institute for several years running.

She quotes Gibson Dunn partner Joseph Warin’s article — Refusing to Settle. Warin says one reason a company would risk going to trial is preservation of reputation.

“Reputation does play a role in how company lawyers manage the investigation on the defense side and how they manage the resolution of a case,” Vash said.

And reputation is central to why corporations fight against guilty pleas.

There are some – like Professor David Uhlmann – who says that in environmental crimes and antitrust, it’s largely guilty pleas. And he believes that in these major corporate crime cases, they should be settled with guilty pleas. For smaller companies, 90 percent end in guilty pleas. For larger public companies it’s more like 47 percent guilty pleas. Why is that the case?

“With a larger company, you are talking about more layers of decision making,” Vash said. “Part of it is funding. Smaller companies don’t necessarily have the ability to mount the same kind of defenses that the larger companies are able to mount. Third, some of the larger companies have much more mature compliance programs. They not only have their finger on what is going on in their company, but they have a better ability to speak to it when the issue and the investigation comes up in the first instance. Some of these smaller companies are just beginning to think about the issue of compliance. The smaller companies don’t necessarily have the mature compliance processes that the larger companies have incorporated into their businesses and can afford. This is part of what our program does – to try and bridge the disconnect between government and companies. And we want to make the information available not just to the big companies but to the smaller companies — so they can see the best practices.”

[For the complete q/a format Interview with Serina Vash, see 31 Corporate Crime Reporter 29(14), July 17, 2017, print edition only.]

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