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FedEx Money-Laundering Charge Adds Pressure to Drug Case


JB Reed/Bloomberg News

By adding money laundering to the charges against FedEx Corp., federal prosecutors are trying to force the package-shipping company to settle its drug-trafficking case, attorneys and analysts said.

“This looks like it’s a matter of ratcheting up the pressure,” said Larry Cote, an attorney at Quarles & Brady LLP in Washington and former associate counsel with the U.S. Drug Enforcement Administration. “It’s like charging someone with murder and then adding an underlying weapons charge.”

Allegations of conspiring to launder money were added Aug. 15 to July conspiracy and drug-trafficking charges that alleged FedEx delivered drugs for online pharmacies, supplying pills to customers who were never examined by doctors, while knowing the actions violated federal and state drug laws. FedEx claims it’s innocent of all counts and will fight the case in court.

The new charges, along with the amount of money and time involved to rebut the accusations and on public relations efforts might make a settlement without an admission of guilt the best course, said Kevin Sterling, a BB&T Capital Markets analyst in Richmond, Virginia.

“They’re trying to throw the book at FedEx,” Sterling said in an interview. “The government is pushing it and, unfortunately, probably the best course of action, the quietest course, is to settle. They’re trying to make life as miserable as possible for FedEx.”

Lillian ArauzHaase, a spokeswoman for U.S. Attorney Melinda Haag in San Francisco, didn’t immediately return a voicemail message seeking comment on the new charges.

FedEx “cannot estimate the amount or range of loss, if any,” from a conviction, the company said in a July 17 regulatory filing. “However, it is reasonably possible that it could be material.”

FedEx Chief Executive Officer and founder Fred Smith “can keep fighting it, but there’s also a cost to that,” Sterling said.

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By Bloomberg News

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