PRIVACY BECOMES ISSUE FOR UPS, FEDEX AS DRUG SEIZURES SURGE

Do Delivery Firms Have Police Responsibilities?

October 11 - When the "Detroit Boys" absolutely, positively had to get
drug money to their suppliers, they sent it via "X-Daddy" - code for
FedEx Corp., king of the overnight-delivery industry and the preferred
service of the cocaine ring that ran at least 12 crack houses in
Minneapolis.

To pay drug suppliers, the dealers regularly bundled piles of cash
into FedEx packages in 1995 and 1996 and let the express carrier
take it from there. For less-urgent shipments, the Detroit Boys used
"Pri-Daddy," the U.S. Postal Service's slower-moving Priority Mail.
Until the gang was busted four years ago, it was known not only for
its shipping savvy, but also for wrapping enemies it thought had
cheated the group in duct tape and beating them.

In recent years, drug traffickers across the country have leapt
enthusiastically onto the New Economy bandwagon of supply-chain
efficiency, motivated by the speed and dependability of
express-delivery services and increased law-enforcement pressure on
airlines and other forms of transport. "I wasn't going to put it on
the plane with me," says Maurice Clark, a Knoxville, Tenn., drug
dealer who nevertheless was arrested and sentenced last year to 87
months in federal prison after sending roughly four pounds of cocaine
in two shipments through United Parcel Service Inc.

Divided Loyalties

The trend has fueled a conflict, reaching as high as the office of
U.S. Attorney General Janet Reno, between law-enforcement agencies
around the country and big express-delivery services over just how
much the companies and the Postal Service should help police. After a
string of run-ins with police over access to its clients' packages,
UPS began requiring warrants before allowing police to search
packages. And the Postal Service still won't let outside
law-enforcement officials inspect outbound international mail.

The tension between police and delivery services highlights a broader
debate about privacy and law enforcement as telecommunications
companies, Internet service providers, banks and other institutions
amass huge electronic databases about their customers' activities.
Among the prominent examples: "Carnivore," the Federal Bureau of
Investigation's new software system for performing court-ordered
wiretaps at ISPs, which has prompted strong criticism from privacy
advocates. For their part, the big parcel carriers, particularly FedEx
and UPS, operate elaborate digital information systems that compile
troves of data about all the packages they carry - in all, about 8% of
the country's economic output at any moment.

Express-delivery services are "the best way to smuggle dope," says San
Diego police detective Steve Sloan, who uses an eight-year-old
Labrador retriever named Alvin to sniff out drugs at package-handling
facilities in southern California. "Pick any night at random, and we
can seize anywhere from 50 to 200 pounds ... and sometimes higher."

U.S. Customs Service drug seizures from express-delivery parcels
ballooned to 970 in 1999, from 69 in 1996, and the amount of drugs
seized from the U.S. mail by postal inspectors jumped 22% last year
alone, reaching 15,436 pounds. The seizures involve dozens of
different criminal organizations. And despite those big numbers,
law-enforcement officials say, most of the drugs and drug money
flowing through the system still goes undetected.

The Postal Service and private carriers such as FedEx and UPS insist
that this is a business they don't want. The carriers also say that
the use of their delivery networks by drug dealers is tiny compared
with the amount of drugs hauled by trucks, cars, boats and human
couriers, and that the spike in drug seizures at least partly reflects
the companies' vigilance in helping police spot suspicious packages.

Taking Umbrage

The four giants of the U.S. express-delivery industry - UPS, FedEx,
Airborne Freight Corp. and DHL Airways Inc. - and the Postal Service
won't talk in detail about their security procedures, citing concerns
that doing so might reveal drug-detection secrets. Privately, though,
industry officials bristle at the suggestion that they have become
major players in the drug business or aren't cooperative enough with
drug-law enforcers.

UPS trains its 68,000 brown-uniformed drivers to look for suspicious
packages. FedEx, based in Memphis, Tenn., has mustered a global army
of more than 500 security personnel whose duties include scouring its
fleet of air freighters and trucks for drugs, while DHL, the U.S.
affiliate of Brussels-based DHL International Ltd., relies on more
than 100 security officers. Postal officials point out that they
seized $12.8 million in drug money during the past two years.

Drug dealers like the express-delivery services for many of the same
reasons that law-abiding customers do - delivery is fast and reliable,
and customers can track their packages. A drug-courier ring busted in
New York earlier this year entered its tracking numbers at the Web
sites of Airborne, DHL, FedEx, UPS and the post office to determine
when the deliveries would arrive at John F. Kennedy International
Airport. Under current postal rules, drug dealers also can mail a
foreign-bound letter holding roughly $200,000 in cash without much
worry that it will be intercepted.

Law-enforcement experts say the increase in use of high-speed
deliveries by drug dealers started in the mid-1990s. A string of
stepped-up investigations and new police techniques had rattled many
dealers and their human drug couriers. Some were particularly spooked
by the new antiterrorism practice, prompted by the 1996 crash of Trans
World Airlines Flight 800, of quizzing airline passengers about
their carry-on luggage, police say.

As police noticed more drug shipments entering delivery systems,
federal Drug Enforcement Administration offices around the country
began negotiating local guidelines with private carriers over how the
companies would handle suspicious packages. FedEx in 1993 reached one
of the first agreements, promising to notify the DEA anytime the
overnight-delivery giant intercepted a shipment of at least 500 pounds
of marijuana or 500 grams of cocaine. FedEx says the aim of the
agreement, which was in essence copied later in other areas of the
country, "was to try to bring some clarity and discipline to the process."

Sluggish In Richmond

Still, tensions flared as drug agents around the country began more
aggressively scrutinizing shipping companies. In 1997, the U.S.
Attorney in Alexandria, Va., accused UPS of slowing down an
investigation into a cocaine-dealing gang in Richmond by refusing
access to suspicious packages at a critical point in the
investigation. "UPS was not as cooperative with the interdiction
efforts of the law-enforcement community as it could be," says James
B. Comey, lead prosecutor in the U.S. Attorney's Richmond office,
which eventually prosecuted more than a dozen dealers in the case. UPS
declines to comment on the matter.

Several months later, state and local police showed up unexpectedly at
a UPS package-handling facility in Cincinnati to look for drugs,
angering UPS officials. In response to incidents like that one,
Atlanta-based UPS issued new guidelines in May 1998 that sharply
restricted police access to its parcel-handling facilities, according
to an internal company memo. The rules required police to get a search
warrant or subpoena to search any suspicious item, to make
appointments to search for drug packages and to stay out of the way of
UPS employees.

UPS refuses to lend uniforms or delivery trucks to undercover agents,
as does FedEx except in rare circumstances, making it harder for
police to arrest dealers after they receive a drug shipment.
Seattle-based Airborne, on the other hand, often provides uniforms and
trucks to law-enforcement officials, while DHL, based in Redwood City,
Calif., occasionally lends uniforms but not delivery vehicles.

"There is no consistent policy, or there is no policy at all, so guys
don't know what to expect day to day," says Clayton Searle, a former
Los Angeles police detective who now leads a nonprofit police-training
organization called the International Narcotics Interdiction
Association. Customs officials became so frustrated that they started
to air their complaints publicly. In a presentation at an air-cargo
conference near Washington in 1998, Phil Metzger, a high-ranking
Customs Service official, described an ominous surge in drug seizures
from private carriers and suggested that express-delivery companies
appeared to have become a top choice for drug dealers.

'Copious Efforts'

The Air Courier Conference of America, an industry trade group with a
board of directors that includes UPS and FedEx executives, fired back.
James A. Rogers, chairman of the group's international committee, sent
a letter to Customs that said any "assertion that the increased drug
seizures are evidence that the express industry is now the preferred
conduit for drug traffickers is a huge jump to a very wrong
conclusion." The drug-seizure increase, he said, was the result of
"copious efforts" by carriers to work with law enforcement. "At the
very least, we believe a public apology is in order," Mr. Rogers
demanded in the letter.

He didn't get one. Instead, top Justice Department officials suggested
to Attorney General Reno in early 1998 that she convene a working
group from officials at the DEA, the FBI, the Postal Inspection
Service, FedEx, UPS, Airborne, DHL, the Emery Worldwide Airlines unit
of CNF Inc. and state and federal prosecutors to discuss a
coordinated, nationwide approach to interdicting drug movements. A key
element promoted by some of the law-enforcement officials, according
to a top postal-inspection official, was to give law enforcement
access to the private databases of the big shippers.

That was a particularly thorny proposition for FedEx and UPS, which
have spent fortunes to build the information systems needed to
orchestrate their clockwork deliveries. Each package moving through
their systems - about 18 million a day combined - is hit by electronic
scanners at least a half-dozen times during even a short journey
within the U.S. As a result, at any instant, the companies' computers
can zero in on the exact locations of items in transit and the history
of other shipments by the same sender or to the same recipient.

The private-sector delivery companies - but not the Postal Service -
are required to supply Customs agents with an electronic record of
delivery-manifest information on all international shipments destined
for the U.S. Customs officials then use their own computers to check
for clues of drug smuggling hidden in the addresses, descriptions of
contents and other data about each package. A box speeding via FedEx,
for example, toward the same address as a previous package nabbed by a
drug-sniffing dog usually will be flagged by the computer. And agents
may inspect any international package on a private carrier without a
search warrant.

But the private carriers aren't required to provide the same data to
law-enforcement agencies about packages being shipped within the U.S.,
and all foreign-bound Postal Service shipments are exempt from
scrutiny without a warrant. Postal officials say the law is clear:
Mail is just as protected from warrantless searches as someone's
house. "There is a delicate balance between defending the borders and
protecting the privacy rights of our citizens," says Kenneth Newman,
deputy chief in the Postal Inspection Service's criminal-investigations
unit. The Postal Service currently is fighting draft federal
legislation that it claims would allow Customs to freely search mail
leaving the U.S.

In the meetings of the Justice Department task force last year and
early this year, which weren't attended by Ms. Reno, officials from
the express-delivery companies insisted that they must walk a
similarly fine line, even though the constitutional protections of the
mail don't apply to them, according to people who attended the sessions.

A Legitimate Crush

FedEx, UPS and other package-delivery companies acknowledge that
it's largely up to them whether parcels in their systems are searched,
but the companies insist that there is a limit to how much they can
cooperate with police while still delivering the crush of legitimate
parcels that flood their systems every day. UPS requires warrants but
won't comment on whether other parts of the policy it issued in 1998
remain in force. DHL says it usually requires a warrant from local or
state police but not from federal agencies.

In the end, the Justice Department backed away from the proposal to
tap private databases, concluding that any such effort might further
complicate relations with the companies. "We didn't want to turn an
army of FedEx people into policemen," a senior Justice Department
official said.

=46or their part, the companies promised to be as cooperative as
possible without violating the privacy of their customers. After the
talks, Justice Department staffers recommended to Ms. Reno that no
national interdiction agreements be pursued, and she agreed, according
to Justice Department officials. The task force hasn't met since then.

In May, federal law-enforcement officials at a House criminal-justice
subcommittee hearing said relations with the big package carriers had
improved. Only the Postal Service was sharply criticized because of
its continuing refusal to let overseas mail be opened without a
warrant. FedEx was praised for tipping off police in 1998 to a huge
marijuana-trafficking organization that allegedly included more than
20 FedEx drivers and other employees, including a security officer at
a FedEx facility at Pier 40 in Manhattan. The resulting investigation
led to more than 100 arrests and the April breakup of a drug ring that
smuggled about 120 tons of marijuana.