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FedEx Settles Whistleblower Suit with U.S. Department of Justice Following Fraud Allegations

Wu, Grohovsky & Whipple, P.L.L.C. Helps Whistleblower Disclose Late Delivery Coding Scheme Tied to 9/11 Attacks

WASHINGTON – (May 4, 2011) The law firm of Wu, Grohovsky, & Whipple, P.L.L.C., today announced the settlement of a multimillion dollar whistleblower lawsuit against Federal Express Corporation (FedEx) for covering up a decade-long fraudulent billing scheme involving thousands of late deliveries that FedEx falsely blamed on 9/11-related security delays.

The U.S. Department of Justice found that, in the decade following the 9/11 attacks, FedEx covered up thousands of late deliveries to the federal government by falsely blaming non-existent “security delays” at government agencies and by claiming that no one was available at the agencies to accept deliveries. FedEx’s cover-up allowed it to fraudulently charge the federal government for millions of dollars in unearned fees.

According to the unsealed complaint issued May 3, 2011, FedEx utilized a system of false code entries into its delivery tracking system to mask its late deliveries of government packages. “Security delay” and “customer not available” codes entered into the tracking system allowed FedEx to blame delays on the federal government and avoid having to honor its money-back guarantee for late deliveries.

Whistleblower Mary Garofolo uncovered the fraudulent practice while employed at FedEx. With the aid of her lawyers, Julie Grohovsky and Shanlon Wu, Ms. Garofolo filed a complaint in 2006 under the federal False Claims Act. The complaint remained under seal until May 3, 2011, while the government investigated the allegations.

Ms. Garofolo, who worked for FedEx for 23 years before retiring in May of 2007, complained of the false coding practice to her supervisors, but her complaints were ignored. Ms. Garofolo said that she had loved working for FedEx and had been proud to be a FedEx employee until sometime after 9/11 when she realized that the false coding of government packages had become rampant. Ms. Garofolo said she thought it was “horrific that FedEx was making money off of the tragedy of 9/11.”

The False Claims Act allows individuals to file actions on behalf of the government against companies that have defrauded the government. It is commonly used when companies overcharge the government for goods or services. In most cases, as with Ms. Garofolo’s disclosures, the fraud would not have been discovered but for the actions of a whistleblower.

“Thanks to the courageous efforts of our client Mary Garofolo, the public was able to learn how FedEx enriched itself on the backs of U.S. taxpayers,” said Shanlon Wu. “This case is a particularly vivid example of how the False Claims Act guards against the waste of our taxpayer dollars.”

“Importantly, without Mary Garofolo, the government would not have learned of FedEx’s fraudulent practices. That is why the False Claims Act remains one of the most effective tools in the government’s arsenal for fighting fraud,” added Julie Grohovsky.

Although real delays did exist shortly after the 9/11 attacks, FedEx continued to exploit security exception codes for years after 9/11 and built those fictitious delays into their business model. The fraud became so rampant that drivers would code entire truckloads of deliveries as “security delayed” before the trucks even left the FedEx stations.

About Wu, Grohovsky & Whipple, P.L.L.C.

Wu, Grohovsky & Whipple, P.L.L.C. is a boutique law firm focusing on cases brought under the qui tam provisions of the False Claims Act.  The firm also defends individuals facing white-collar and criminal charges, as well as individuals under investigation by the Department of Justice Office of Professional Responsibility and Office of the Inspector General. Shanlon Wu and Julie Grohovsky are former senior Assistant United States Attorneys with more than 25 years of combined prosecutorial experience.

For media interviews or additional information, please contact Derede McAlpin at 202-973-1314 or dmcalpin@levick.com.

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Attorney Shanlon Wu Washington DC White Collar Criminal Defense Lawyer

Shan Wu is a former federal prosecutor whose law practice focuses on white-collar, criminal and student defense matters.  From 1999-2000, Shan served as Counsel to Attorney General Janet Reno, advising her on criminal and civil investigations, E-Gov, E-Commerce (electronic signatures, internet gambling, internet telephony, privacy & public access issues in electronic court filings), congressional oversight, and legislative review. His responsibilities included serving as liaison to the FBI, DEA, Criminal Division, Executive Office of United States Attorneys, National Institute of Justice, and White House Counsel’s Office.