FedEx’s costly money-back violation

FEDEX has been ordered to pay US$8 million for violating its money-back guarantee on late deliveries.

In a court case the operator of the world’s largest cargo airline blamed the US government’s stringent post-9/11 security measures for the tardiness, a point which the government contests.

“Companies that commit to provide services to the United States are expected to meet their commitment and not ‘game the system’ to take advantage of their government customers for the benefit of their own bottom line,” US attorney Ron Machen said.

The lawsuit involves security exception codes that made packages exempt from the money-back guarantee because of increased security measures faced by couriers at federal buildings in the wake of the 2001 terrorist attacks.

Former FedEx employee Mary Garofolo filed the False Claims Act lawsuit in 2006, alleging the practice continued “long after security measures at government buildings subsided or became a routine part of making deliveries”. As a result of this settlement Garofolo will receive $1.44 million as her share of the government’s recovery, according to the settlement.

FedEx denies the allegations and admits no liability.

“FedEx has worked hard to strike a balance between the customer’s need for prompt deliveries and the government’s need for the highest security, which is why the government didn’t identify one shipment where a security delay code had been applied and where there wasn’t a security delay,” FedEx spokesman Maury Lane said.

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