What's in the box? FedEx and Amazon cases test big business accountability

FedEx and Amazon are both under federal scrutiny for what they are shipping. The shipping giant faces criminal charges, while Amazon could be hit with a $350,000 fine. 

The contents of packages are the subject of heated court testimony this week, and potentially the cause of hefty fines, as FedEx and Amazon face cases that test the accountability of big business. 

Fines totaling $350,000 were proposed this week by the Federal Aviation Administration (FAA) as a punishment for Amazon.com Inc., which the FAA accused of repeatedly – and knowingly – shipping prohibited hazardous materials by air.

"Knowingly" is also a key word in another shipping-related case starting this week in San Francisco, where federal prosecutors are attempting to prove that FedEx is criminally responsible for delivering illegal prescriptions from online pharmacies. Prosecutors will draw from dozens of internal emails that they say prove FedEx knew that the prescriptions and their distribution were illegal, according to Bloomberg. 

While the two companies face different situations and potential consequences – criminal charges for FedEx, civil penalties for Amazon – they both mark instances of giant corporations being scrutinized by the federal government for behavior they had apparently been warned about repeatedly.

When FedEx was indicted for shipping illegal prescriptions in 2014, the court filing cited repeated warnings that federal drug enforcement officials had already issued to the shipping and logistics corporation.

The Amazon case also has a lineage of reported federal complaints behind it.

"Amazon has a history of violating the Hazardous Materials Regulations," the FAA said in a press release. The company violated these regulations 24 times in two-and-a-half years, the agency said, according to The Wall Street Journal. 

The FAA is asking for the fines to be levied on Amazon relating to a 2014 incident where nine UPS workers came into contact with a leaking container of "Amazing! Liquid Fire" drain cleaner during a flight and were treated with chemical wash. The FAA says that Amazon neither stated that the package contained hazardous material nor provided proper training and emergency information, Reuters reports.

Companies must comply with hazardous material regulations similar to those that greet air travelers, or people shipping private packages. They restrict the movement of certain dangerous materials, like those that are flammable or corrosive. The FAA delineates these restrictions with procedural guidelines for air carriers, passengers, and vendors that ship using commercial transportation.

Amazon paid a fine of $91,000 in 2014 for a previous incident related to hazardous materials. 

The newly proposed fine comes as Amazon ramps up its own fleet of jets for shipping its products, instead of relying on other carriers. While FAA standards would still apply to these flights, the handling of materials on planes would be done by company employees. 

"As they try to do more of the distribution using their own network of air and ground services, knowing the distinction between what can go by ground and what can go by air will become more and more important," Satish Jindel, founder of SJ Consulting Group Inc., which specializes in logistics, told The Wall Street Journal. "Before, when they were smaller, they didn't have to make as many distinctions between ground and air."

In the FedEx case, the shipping details as well as the company's profile are also central to the proceedings. In court on Monday, Assistant US Attorney John Hemann accused the shipping giant of using its corporate "air of legitimacy" to do what is essentially no different than a person trafficking drugs across a US border. The prosecution accuses FedEx not just of being a vector for the movement of these drugs, but also of being part of a conspiracy with these pharmacies.

"This drug courier should be treated in this court just like your honor would treat every other drug courier," Mr. Hemann told Judge Charles Breyer.

Breyer, however, is skeptical. Before the start of the trial he pushed prosecutors to prove, before other testimony, that the company knew that prescriptions and pharmacies were illegal and that they intended to make money off their shipping fees regardless. 

If convicted on charges that include conspiracy and money laundering, FedEx could see fines of up to $1.6 billion.

FedEx says that it has worked with drug enforcement officials, and provided records of those meetings. The company has denied the allegations and the implication that they should be held responsible for illegal prescriptions.

"We view the whole concept of wrongdoing by FedEx as absurd," company spokesman Patrick Fitzgerald told Bloomberg. "We're a transportation company but we're not law enforcement."