Thread: Union Pacific sues to block $38M in fines tied to drugs disc

Union Pacific sues to block $38M in fines tied to drugs discovered in border rail cars
THE ASSOCIATED PRESS
Tucson, Arizona | Published: 08.05.2008

OMAHA, Neb. — Union Pacific Corp. wants a federal judge to set aside nearly $38 million in proposed penalties that a U.S. agency has assessed against the railroad since 2002.
The fines against the railroad are related to 42 incidents when U.S. Customs and Border Protection agents found drugs stashed in rail cars crossing the border between the U.S. and Mexico.
Union Pacific said it does not control the train cars until after they are inspected by customs agents, so it should not be held liable for what happens in Mexico. Most of the Mexican trains Union Pacific handles are controlled in Mexico by its shipping partner Ferrocarril Mexicano, which runs the Ferromex railroad.
At the border, customs agents take control of trains and inspect them before giving Union Pacific control, the Omaha-based railroad said.
"UP was not and cannot be the person in charge of the trains when they were bound to the United States as required by the statute," the railroad said in the lawsuit.
A customs spokesman said the agency does not comment on pending litigation. But Union Pacific included several letters from customs officials as exhibits for its lawsuit, and those letters offer some insight into the agency's position.
Charles Ressin, who is chief of the customs agency's penalties branch, said in a March letter that Union Pacific is responsible for the accuracy of the manifest when it is presented to agents at the border. So Union Pacific should ensure the cars are inspected in Mexico to make sure no contraband is hidden aboard.
Ressin said that if Union Pacific itself can't inspect the Mexican trains it should work with its shipping partners to hire an outside security firm to conduct inspections, much like U.S. air and sea carriers do in similar high-risk areas.
Marijuana accounts for nearly all of the 4,514 pounds of drugs agents found in the incidents Union Pacific described in the lawsuit filed Thursday. Only one of the seizures involved cocaine. About 257 pounds of the drug was found in 2003.
Drugs were often found in false compartments on the rail cars. Thirty-seven of the seizures took place at the Calexico, Calif., crossing. Four happened at Nogales, and one seizure happened at Brownsville, Texas.
In response to Union Pacific's administrative protests, the customs agency has cut the fines to about 10 percent of the original amount. But the agency has refused to dismiss all the $37.8 million in proposed fines, saying Union Pacific was negligent.
Union Pacific said customs inspections themselves often leave the trains vulnerable. While agents check the Mexican railroad crew's paperwork, rail cars can stretch back into Mexico and sit unprotected. Some trains are two miles long.
Union Pacific said it owns 26 percent of Ferrocarril Mexicano but does not control the Mexican company and cannot force it to make drug interdiction efforts. Mexican mining and railroad company Grupo Mexico controls Ferrocarril Mexicano and Ferromex.
Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts. The railroad interchanges trains with Mexican railroads at six different border crossings.

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Drug smugglers frustrate railroads
Saturday, August 09, 2008; Posted: 05:04 AM
Aug 09, 2008

Violent Mexican drug cartels are using every means possible to get cocaine, marijuana and heroin into the United States, including false compartments on rail cars hauled by Omaha-based Union Pacific Corp. and other railroads.
Drug smuggling on railroads drew little public interest until last week's revelation that a federal agency had fined Union Pacific nearly $38 million for allowing drugs into the country.

Union Pacific is contesting the fines and the seizure of six rail cars.

Commercial trucks face a similar problem of illegal drugs being hidden on rigs, said Martin Rojas, executive director of safety and security operations for the American Trucking Associations.

"I know it happens," Rojas said. "Operating on the Southwest border is a very tough environment security-wise because of the constant pressure of the drug trade."

Joe Rajkovacz, regulatory affairs specialist with the Owner-Operator Independent Drivers Association, pointed to a 1999 arrest and eventual conviction of a Missouri trucker who said marijuana had been hidden in a drum he hauled from Mexico.

"You literally as a driver never know what is in these pallets," Rajkovacz said.

Drug traffickers use commercial and private aircraft, ships, trucks, cars, rails, tunnels, backpackers, couriers, horses and mules to smuggle billions of dollars worth of drugs every year into the United States. The Southwest border is the primary point of entry, according to the U.S. Drug Enforcement Administration.

Most of the cocaine, foreign-source marijuana and methamphetamine, and Mexican-source heroin available in the United States is smuggled into the country across the border from Mexico.

The enormous volume of people and goods legitimately crossing the border between the two countries is one source of difficulty for drug enforcement. Large sections of the nearly 2,000-mile land border also are vast and remote, providing additional smuggling opportunities.

And screening for and stopping the drug traffic is dangerous.

Union Pacific doesn't want to inspect rail cars while the cars are in Mexico.

"Anyone who interferes with drug gangs in Mexico risks injury and death," the railroad said in its lawsuit challenging the fines.

Using rail cars to smuggle drugs has been going on at one level or another for decades, said Lloyd Easterling, a spokesman for U.S. Customs and Border Protection.

"Smugglers are trying to get their loads into the interior by any means necessary," Easterling said.

The Association of American Railroads, a trade group representing major freight railroads in the United States, Canada and Mexico, said the question had not come to its attention before the U.P. case.

"It's a new sort of issue from an association standpoint," said Kelly Donley, the association's assistant vice president of communications. "It's not something we've addressed."

Easterling said security efforts have increased along the Mexican border since 9/11, and that could mean more inspections than in the past of rail cars and other conveyances.

According to court documents filed by Union Pacific, U.S. Customs and Border Protection had levied the fines against the railroad since 2002. The case stems from 41 instances of marijuana and one instance of cocaine hidden on rail cars and found by agency inspectors as the cars crossed the border from Mexico.

In one incident, agency inspectors found a false wall in a rail car that held 117 kilograms of cocaine. The agency fined Union Pacific $4.1 million, representing $1,000 per ounce of cocaine.

Union Pacific is one of three major U.S. railroads with direct rail connections into Mexico, with six gateways across the border. The others are Kansas City Southern and BNSF Railway Co., with two border crossings each.

Kansas City Southern and BNSF Railway have not been fined in connection with drug smuggling. Easterling declined to comment in an interview on what triggered fines against Union Pacific or on any other aspects that could reflect on the case.

U.P.'s six gateways to Mexico could mean it deals with more rail volume than other companies, company spokeswoman Donna Kush said. In addition, she said, those ports are in areas with significant smuggling.

All three railroads said they work closely with law enforcement and customs officials. Union Pacific, for example, spends at least $3.6 million annually for programs that support federal efforts to stem drug smuggling along the border.

Union Pacific argued in its court documents that the drugs found in the rail cars were planted in Mexico, where the company did not control the cars and couldn't guard or inspect them.

The government contends that Union Pacific could do more, such as hire a security company or work with its business partner Ferrocarril Mexicano, of which Union Pacific owns 26 percent.

Kansas City Southern de Mexico, a wholly owned subsidiary of Kansas City, Mo.-based Kansas City Southern, operated one of the trains in Mexico involved in the U.P. case. Ferrocarril Mexicano operated the other trains involved.

BNSF Railway, based in Fort Worth, Texas, does not own or have any financial ties to railroads in Mexico.

Among trucking companies in Nebraska, Werner Enterprises Inc. of Omaha, a publicly traded company and one of the nation's five largest truckload carriers, states on its Web site that it operates in Mexico. The company declined to comment on the matter.

Crete Carrier Corp., a private trucking company based in Lincoln, said it does some business on the U.S. side of the Mexican border, primarily shipping products to and from Mexico for Nebraska companies.

Crete Carrier drivers don't cross the border into Mexico, said Jack Peetz, chief operating officer. Mexican trucking companies handle the products in Mexico, and the U.S. drivers generally head straight back to the Nebraska firms that the company serves, he said.

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