U.S. News

07.29.14

Is FedEx America’s No. 1 Drug Dealer?

The shipping company heads to court Tuesday to face $1.6 billion in charges of conspiring to traffic illegal meds. A former courier, allegedly told to ‘protect drug dealers,’ isn’t surprised.

The staples were the giveaway.

They were driven into every inch of the envelopes that local pizzeria owner Vincent “Vinnie” Scotto allegedly handed off to FedEx courier Gary Rullo for overnight delivery from Delaware to Brooklyn, New York, once a week in the late 1980s.

“Several times he asked me if they X-rayed the shipments in Memphis, where the sort was,” Rullo wrote in his 2012 book about working for FedEx. It was a question, according to his account, that he was asked over and over again. “The customer would imply that they were shipping picture film, but you knew why they were asking. Most times they had drugs in their shipments.”

Once, Rullo wrote, the small Italian man pulled a gun on him because one of the packages had gone missing. “‘Gary, you tell your motherfucking druggie couriers to keep they’re [sic] fucking hands off my shipments,’” Scotto allegedly told Rullo. “’Cause if they don’t, they’re going to wind up dead.’” 

Rullo promised he’d work harder to protect the packages. But just a few months after the incident, Rullo wrote, Scotto’s shipments mysteriously stopped. Unbeknownst to Rullo, Scotto had not only been caught by the feds but agreed to cooperate with them. Over the next year, a wiretapped Scotto, who according to Delaware court records pleaded guilty to two counts of conspiracy to traffic heroin, led the FBI directly to the main players in Delaware’s drug trafficking game.

At the time, the American media detailed the massive amounts of heroin and cocaine that the 11 men indicted by a federal grand jury on charges of distributing and conspiracy to distribute heroin and cocaine were accused of distributing throughout the United States. But in all the coverage surrounding the case, not once was FedEx’s possible role in the distribution network mentioned. With all testimony from Scotto’s case sealed, the question of whether it played a role remains one.

In Rullo’s eyes, its already been answered. When he approached his manager with his suspicions about Scotto’s merchandise in the late ’80s, he said he was sternly told that keeping the drug dealer’s packages safe was part of his job. “Many times I have heard a FedEx courier or member of FedEx management boast that, ‘We’re the number one shipper of illegal drugs in America,’” he writes in his book.

FedEx did not speak out about the claims made by Rullo. In a response to The Daily Beast’s request for comment on Rullo’s accusations, the company sent this reply: “FedEx has a long standing policy of close cooperation with law enforcement authorities. You will need to contact the prosecutors for information concerning this matter.” At a hearing in U.S. District Court in San Francisco on Tuesday, the company faces charges of conspiring to distribute illegal substances; if convicted, it could be fined up to $1.6 billion.

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The story turns darker in the spring of 2002, when Rullo said an unknown assailant attacked him inside his home. “My wife came home and found me semi-conscious and covered in blood on our bed which was also covered with my blood,” he writes in the book. “I had an open wound to the back of my head and had been unconscious for hours. She quickly called an ambulance which rushed me to the hospital emergency room and they saved me.”

In the months following the alleged incident, his behavior became erratic. He started to fixate on a woman named Shirley Ann Jackson, the president of a polytechnic institute on the East Coast who also served on FedEx’s board of directors. According to a report in the Associated Press from December 2003, Rullo allegedly drove to her town of Troy, New York, and posted “Wanted” posters offering a $100,000 reward for information leading to her arrest—all in the absence of any evidence of wrongdoing on her part. In an article printed in The Times Union on September 17, 2003 (also not available online), the prosecutor describes one specific poster in which Rullo allegedly threatened to “rip her throat out” if Jackson came near his family.

In October 2003, he pleaded not guilty to a third-degree felony stalking charge and four counts of aggravated harassment as a hate crime. At Rullo’s sentencing, which resulted in six months of jail time, his attorney Charles Wilcox reportedly sought mercy from the judge. “‘He never tried to get close to Mrs. Jackson,’” he said, according to The Times Union’s September 2003 article. “‘While he has protested and sent e-mails to all the board members, he has made no effort to hurt anyone.’” Rullo’s wife, Dorothy, the same article reports, told the court that her husband had suffered head injuries in March 2002 and that his volatility was the byproduct of an 11-year dispute with his former employer, FedEx.

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Save for scattered reports through the years of drugs being found in packages—which, in at least one case, the company helped the DEA locate—Rullo’s depiction of the delivery behemoth as a drug trafficker all but disappeared. But a new lawsuit alleging FedEx may have been complicit in a conspiracy to traffic prescription drugs nationwide raises new questions.

On July 18 this year, a secret nine-year investigation into the company by the Drug Enforcement Administration (DEA) and the Federal Drug Administration (FDA) culminated in a 33-page indictment accusing FedEx of conspiracy to traffic in controlled substances and misbranded prescription drugs totaling more than $1.6 billion. Filed in San Francisco, the lawsuit claims the company willingly allowed two different Internet pharmacies to distribute controlled substances nationwide without a license—and, even more damning, helped them do so.

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In the indictment, the DEA and the FDA claim the two online pharmacies operated a racket in which they would ask for bare-bones information—address, height, weight, date of birth, and credit card number—from customers who wanted to order prescription pills, from Xanax to Viagra, and then route the request through a partner “fulfillment pharmacy” with the necessary licenses to carry controlled substances. Then, with the help of FedEx, the fulfillment pharmacies would deliver the pills nationwide.

By 2004, the two agencies and several members of Congress were sending notifications to FedEx executives alerting the company that it was shipping controlled substances from an illicit Internet pharmacy. “FEDEX knew that the Chhabra-Smoley Organization and Superior Drugs were each distributing controlled substances and prescription drugs based solely on a customer’s completion of an online questionnaire,” the indictment reads. “Nevertheless, FEDEX continued to ship controlled substances and prescription drugs for the Chabra-Smoley Organization and Superior Drugs.”

By the mid-2000s, business was booming for the entire world of online pharmacies—not just Chabra-Smoley. “Brilliant service from ‘NoPrescriptionChemist.’ I received my order of Valium and Alprazolam just 6 days after placing my order...including the weekend,” a user responded in November 2007 to a LifeHacker post inquiring about online prescriptions. “My friends and I always use ‘Online Pharmacy Broker’ and we’ve nevery [sic] had a problem. Excellent online drugstore,” writes another. Some websites, like “MedsCorp VIP,” offered membership benefits. Others, such as “ED Med Shop,” focused specifically on one condition (in this case, erectile dysfunction). None of the ones listed exist at this point—all likely casualties of the DEA’s crackdown on the sites around the same time. In nearly every case in which an e-pharmacy was using FedEx, the shipping company was left carrying the burden of outstanding accounts payable that the customers did not pay, according to the indictment.

In a move that the DEA and FDA suggest shows both knowledge of the illicit online pharmacy industry and awareness of its potential for boom and bust, FedEx established an “Online Pharmacy Credit Policy.” This required all online pharmacies to provide FedEx with a security deposit, bank letter of credit, and to be subjected to “limited credit terms.”

In 2004, the DEA estimated that FedEx had 200 registered online pharmacies. By 2010, it had more than 600. As early as the mid-2000s, the indictment reveals, employees in multiple states had allegedly expressed concerns to management about the dangers of delivering addictive pills. According to the investigation, deliverymen and women reported being “stopped on the road by Internet pharmacy customers demanding packages of pills” and “[being] threatened if they insisted on delivering a package to the address instead of giving the package to the customer who demanded it.” Others claimed that customers were “doctor shopping” and expressed concern that some of them had “overdosed and died.”

Instead of targeting the companies, FedEx re-structured the delivery plan, according to investigators. A senior vice president of security reportedly launched an initiative that allowed delivery people to leave packages from “problematic shippers” at a station where the consumer could pick them up. But shielding the employees from potentially dangerous encounters didn’t change the nature of the business, the federal agencies say. FedEx was still willingly aiding in the distribution of controlled substances without the need for a prescription from a qualified physician. Over the course of the nine-year probe, FDA and DEA agents claim they repeatedly ordered prescriptions—varying from weight-loss medication to erectile dysfunction pills—using an online questionnaire only.

The report, signed by Special Investigator J. Douglas Wilson, asks for the maximum fine against FedEx for its derived gross gains of $820 million (namely, double that amount, $1.6 billion). In a statement on its website, FedEx responded: “FedEx transports more than 10 million packages a day. The privacy of our customers is essential to the core of our business. This privacy is now at risk, based on the charges by the Department of Justice related to the transportation of prescription medications.”

In a statement on the Department of Justice’s website, acting Director of the FDA Philip J. Walsky also commented on the charges. “Illegal Internet pharmacies rely on illicit Internet shipping and distribution practices. Without intermediaries, the online pharmacies that sell counterfeit and other illegal drugs are limited in the harm they can do to consumers,” he said. “The FDA is hopeful that today’s action will continue to reinforce the message that the public’s health takes priority over a company’s profits.”

Rullo, for one, is not surprised by the indictment. “The number one drug shipper in the world, that’s what managers always said: ‘Do not ever call the cops. Don’t mess with the drug shipments, leave them alone,’” he tells The Daily Beast. It’s been almost two decades since he worked for the company and if anything, he’s shocked that the feds have finally come forward against a practice that, in his view, pervaded FedEx for decades. “No one wanted to talk about it because they were afraid. I was the only one dumb enough not to be afraid.”

Ahead of the shipping company’s July 29 appearance in court, questions about its handling of drug shipments over the course of its 43-year history will remain unanswered. Rullo, for one, thinks he’s solved the case—and encourages others to do the same. “If you look hard enough,” he tells, “you’ll find more stuff than you could ever believe.”  

Research contributed by Brandy Zadrozny