UPS caught helping online pharmacies, settles for $40M

Because illegal Internet pharmacies are located in countries beyond the reach of U.S. law enforcement, authorities have turned to pharmacy supply chain services like Google and credit card companies to help derail their operations. Authorities knew online pharmacies relied on express delivery services but were chagrined to learn that UPS not only was being used for fishy deliveries but was actually courting the Internet pharmacy business, even after warnings from law enforcement. 

Those are the allegations made in a settlement between UPS and federal authorities in which the delivery giant will cough up $40 million it made from these special clients and has agreed to a compliance program that will train employees to avoid being complicit in the online drug business. 

Both UPS and FedEx last year indicated that federal authorities had been looking at their practices. Initially, as The Wall Street Journal reports, UPS took a defensive posture, with an attorney saying the feds shouldn't expect UPS employees to serve as deputies. But according to documents posted on the website for the U.S. Attorney in San Francisco, emails showed that some employees were actively courting and facilitating the business of online pharmacies because some of the accounts were spending as much as $5,000 a day for deliveries. 

The "Agreed Statement of Facts" said that in 2003, some marketing employees targeted Internet pharmacies as a growth area and created a team of a dozen employees that worked to win business away from competitors. Then despite growing evidence of the illegal nature of some of the companies, both from employees within UPS and from law enforcement officials, UPS continued to curry favor with some accounts up to 2010. UPS even provided C.O.D. enhancement services to consolidate payments for some pharmacies. And as WSJ reports, some drivers made deliveries to customers in parking lots, a practice that might have indicated the illicit nature of the business.

The "non-prosecution agreement" says that in exchange for the UPS oversight program and a new attitude, the government will not prosecute the company for crimes including conspiracy, distribution of controlled substances and money laundering. A UPS spokesman told The Wall Street Journal that while it is unclear that UPS actually violated any laws, it is prepared to work with federal authorities "so we can immediately shut off shipping services to those pharmacies."

- here's the U.S. Attorney's announcement
- read the WSJ story (sub. req.)