The U.S. Attorney in San Francisco, Brian Stretch, said he has assigned the office's deputy criminal chief to a review that could take two months. It will examine why prosecutors brought the case, what oversight supervisors provided and what role officials in Washington D.C. played, Stretch said in an interview Wednesday.
"This is not a finger pointing exercise," he said. "This is an exercise with the singular purpose to find lessons learned, and apply them to current and future cases."
The outcome could hold lessons for government regulators, prosecutors and corporate defense lawyers, said Laurie Levenson, a professor at Loyola Law School in Los Angeles and a former assistant U.S. Attorney.
"It can impact policies not just on whether they go after individuals or organizations," Levenson said. "It can impact how aggressive you get with the use of criminal law, as opposed to civil law or regulatory actions."
The Justice Department's strategy in the FedEx case is one that had worked for it many times before: Call in a company suspected of wrongdoing, present it with the evidence and try to come to a settlement in exchange for not seeking criminal charges.
In October 2012, DOJ officials from Northern California and Washington met with FedEx attorneys in San Francisco and presented evidence the prosecutors said showed the company had knowingly shipped illegal Internet prescriptions, according to a person who attended.
The Justice Department already had wrung $500 million from Google over ads it carried for online pharmacies, and the government was in negotiations with United Parcel Service over drug deliveries that would lead to a $40 million settlement.
Key to the case against FedEx, prosecutors told company lawyers at the 2012 meeting, were internal corporate emails the government obtained by subpoena. In one, a FedEx executive wrote about online pharmacies: "It is becoming more apparent to us that many of these companies are fraudulent."
FedEx said the emails were taken out of context, according to the source at the meeting. Not only had it done no wrong, its lawyers said, the company had repeatedly told the Drug Enforcement Administration it would suspend deliveries from any pill distributor identified by investigators as engaging in illegal action.
FedEx refused to settle and opted to take the case to trial.
In accepting the government's decision to drop the case last month, U.S. District Judge Charles Breyer noted the company's cooperation and said FedEx "did not have criminal intent."
FedEx's trial lawyer, Cristina Arguedas, said a government review was essential because the Justice Department had repeatedly ignored evidence of the company's cooperation.
"This was an epic institutional failure on the part of the Department of Justice, and the department owes an explanation to the public on how this failure occurred," she said.
Stretch declined to respond. But he said he was proud of the effort, despite the result.
Critics have argued that non-prosecution agreements, the type of deal the government sought in the FedEx case, unfairly burden shareholders and are ineffective deterrents against individual wrongdoing.
Such settlements, which include deferred prosecution agreements, were rare in the 1990s. But after the indictment of audit firm Arthur Andersen led to its demise, companies and the government have sought to avoid trials. In recent years, the Department of Justice has negotiated 20 to 40 deferred and non-prosecution agreements annually, according to data compiled by the University of Virginia.