Updated May 4
FedEx Corp. has agreed to pay the federal government $8 million to resolve allegations the company misused delivery codes to excuse couriers from failing to deliver overnight packages in a timely fashion.
The whistleblower suit, filed in 2006 in U.S. District Court for the District of Columbia, alleged FedEx couriers used special delivery codes to shield late deliveries in order to get out of reimbursing the government for untimely delivered packages. The suit, brought by a FedEx employee, was under seal until today.
FedEx, according to the settlement (PDF), continued to use “security delay” codes after security measures at government buildings were relaxed or became a regular part of making deliveries in the post-Sept. 11 environment. The government paid for priority overnight service that was not actually provided, according to the suit.
“Companies contracting with the government must be held accountable for the misconduct of their employees,” Cynthia Schnedar, acting inspector general for the Justice Department, said in a statement. “We will ensure that the government funds are spent wisely and in accordance with negotiated contracts and procedures.”
The whistleblower, Mary Garofalo, represented by the firms Mallon & McCool and Wu, Grohovsky & Whipple, is expected to receive $1.4 million for her work in exposing FedEx’s false billing practices. For a copy of the complaint, click here.
A lawyer for Garofalo, Steven McCool, said in a statement Wednesday: “FedEx reaped large profits by falsely claiming over many years that security delays in the wake of 9/11 caused its couriers to deliver packages late to government offices. This misconduct has ceased, because Ms. Garofolo courageously reported this abuse to federal authorities.”
FedEx denied any wrongdoing, saying the settlement “represents a compromise to avoid continued litigation and its associated risks.” The settlement, the company said, is not an admission of liability. A lawyer for FedEx, John Boese, of counsel with Fried, Frank, Harris, Shriver & Jacobson in Washington, was not immediately reached for comment.