MEMPHIS, Tenn. (Legal Newsline) - The Tennessee Senate minority leader says the U.S. Department of Justice’s decision to do an internal review of its failed case against Memphis-based FedEx Corporation is “good news” for the company, noting the prosecution initiated by former U.S. Attorney Melinda Haag of the city’s largest employer seemed “overzealous.”
“The prosecution seems to get a little out in front of the skis here,” Sen. Lee Harris, a Memphis Democrat and law professor, said of the case.
Meanwhile, Haag has reopened her checkbook since retiring from public service. After giving more than $9,000 to President Barack Obama in 2008 -- two years before he nominated her as U.S. Attorney in San Francisco -- she just gave almost $3,000 to Hillary Clinton's campaign.
In June, Judge Charles Breyer, of the U.S. District Court for the Northern District of California, concluded FedEx was “factually innocent.” Haag, in 2014, had brought the full power of her office when she charged the global courier with conspiring to transport illegal prescription drugs.
The bench trial, which began June 13, came to an abrupt end that Friday, June 17, following detailed opening statements by both the DOJ's and FedEx’s attorneys.
The U.S. Attorney’s Office moved to dismiss the indictment; Breyer granted the motion and dismissed. The DOJ hasn’t revealed the reasons behind the dismissal, but an attorney for FedEx told Legal Newsline that the case was an “epic failure” on the part of federal prosecutors led by Haag.
Reuters reported last month that the DOJ has begun a “rare” review of its failed case against FedEx, but the DOJ has refused to respond to questions from Legal Newsline concerning the specifics of the review.
The review, according to Reuters, could take two months to complete and is not intended to be a “finger-pointing exercise.”
But could the agency’s decision to dismiss the charges -- and, ultimately, its failure -- be the result of a change in leadership, as suggested by Breyer in his decision to dismiss the charges? Brian Stretch became U.S. Attorney in March.
“While the Court is critical of the decision to prosecute, it wishes to commend Government counsel, especially (Assistant U.S. Attorney) John Hemann, who was not part of the original decision to prosecute and who now seeks dismissal of these charges,” the judge said in a statement, which he read from the bench in approving the dismissal, according to The Washington Post.
Haag, who originally brought the case against FedEx, left the U.S. Attorney’s Office last year. After a six-month sabbatical from public life, she returned to private practice in March.
According to the Orrick Herrington & Sutcliffe LLP website, she is working in its San Francisco office in the White Collar and Corporate Investigations Group.
When asked by Legal Newsline how she felt about the DOJ’s review of the case, Haag said she was unable to comment and directed all questions to the U.S. Attorney’s Office.
A spokesman with the U.S. Attorney’s Office failed to respond to Legal Newsline’s repeated requests for comment on the review, including questions on who is overseeing it and what, exactly, the DOJ is looking for. The office told Reuters the review will determine why the case was brought, what oversight was provided by supervisors and what role officials in D.C. played.
According to a source familiar with such reviews, who handles the review is telling.
If the DOJ’s Criminal Division does the scrutinizing, it’s considered a functional review.
A review done by the Office of Professional Responsibility, which is responsible for investigating allegations of misconduct involving DOJ attorneys that relate to the exercise of their authority to investigate, litigate or provide legal advice, is considered much more serious and tends to draw more attention within the DOJ.
Harris, who was born and raised in Memphis and served on the Memphis City Council prior to assuming state office in 2015, also teaches at the University of Memphis School of Law. He teaches and publishes in the fields of corporate law.
As Memphis’ largest employer, FedEx is “literally and psychologically” the most important organization in the city, Harris said.
“Everyone in our area, the Mid-South, respects and reveres the company and we’re all proud that Memphis is the site of their headquarters and one of their biggest hub operations,” the lawmaker explained.
Harris said FedEx’s decision not to settle with the DOJ was a reasonable one, given the possible economic impact.
“I think the goal is to avoid a bad precedent,” he said. “I’m not familiar with all the details, but it’s reasonable for a company, like FedEx, to want to avoid a precedent that could expand their liability in terms of the contents of shipping or individuals that use the service.
“I’m sure they believe it’s a slippery slope and it would be too costly to undertake the kind of scrutiny required to guarantee that all of their shipments or shippers are in compliance at all time.”
Harris continued, “It would also be a time-consuming process, which could really hurt a company that prides itself on speed, speed, speed.”
Haag was nominated by President Barack Obama to serve as the U.S. Attorney for the Northern District of California in 2010. Haag has been an Obama supporter since the beginning.
In 2008, she gave more than $9,000 to Obama’s cause -- $4,850 to the Obama Victory Fund and $4,600 to Obama For America.
She also gave $2,700 to Clinton’s presidential campaign in June.
At the time of her nomination, U.S. Sen. Barbara Boxer, D-Calif., praised Obama’s decision to nominate the “veteran attorney” to serve as the top federal prosecutor in San Francisco.
“She is well respected in the California legal community and will bring more than two decades of experience handling white collar crime cases to the U.S. Attorney’s Office,” Boxer said of Haag in a statement.
Haag had been a partner at Orrick since 2003 before joining the U.S. Attorney’s Office, handling cases involving fraud, antitrust violations, environmental crimes, health care fraud and other corporate matters.
Prior to her first stint at the firm, Haag was recruited by former U.S. Attorney and FBI Director Robert Mueller to serve in the San Francisco U.S. Attorney’s Office, where she headed the White Collar Crime Unit and was the deputy chief of the General Crimes Unit.
From 1989 to 1993, she served in the Los Angeles U.S. Attorney’s Office. For a brief time after, she worked at the San Francisco firm Landels Ripley & Diamond LLP.
While the U.S. Attorney’s Office has said the review of the FedEx case isn’t meant to assign blame, so much as an exercise to “find lessons learned” and apply them to other cases, attorneys for FedEx contend DOJ prosecutors ignored evidence that the company tried to cooperate with the federal agency.
Still, questions remain.
Was the DOJ’s legal theory faulty from the beginning, because FedEx simply is a carrier?
Was the agency being more aggressive with regard to the shippers -- United Parcel Service Inc., included -- because it was having a difficult time identifying the source of the problem?
FedEx’s Atlanta-based rival, UPS, was similarly charged; however, UPS agreed to settle with the DOJ for $40 million in 2013. The U.S. Post Office faced no charges.
Were UPS and FedEx simply the easier targets?
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.