U.S. District Court orders Dept. of Homeland Security to halt its multimillion fines against Union Pacific, stop seizing railroad equipment in drug smuggling case

LINCOLN, Nebraska , December 20, 2011 () – Federal judge sides with Union Pacific in Neb. drug-smuggling lawsuit, orders US to halt fines

U.S. border officials exceeded their authority when they imposed multimillion-dollar fines against Union Pacific Corp. for failing to discover illegal drugs in railcars that crossed into the country from Mexico, a federal judge ruled Monday.

U.S. District Judge Joseph Bataillon ordered the Department of Homeland Security to halt its fines against the Omaha-based railroad and stop seizing railroad equipment in drug smuggling that the company says was beyond its control.

At issue was whether it's proper for U.S. Customs and Border Protection officials to impose these fines on railroads. Union Pacific, the largest rail shipper on the U.S.-Mexico border, has argued that it shouldn't be held responsible for the train cars until after they cross the border. Government officials maintain that the railroad is responsible for verifying the nature of what it brings into the country.

Union Pacific chairman and CEO Jim Young said the company was pleased with the ruling, but added the railroad will continue working with federal officials to improve security.

"We have already invested tens of millions of dollars in technology, infrastructure and training to promote safer and more secure rail transportation across the border, and we will continue this collaboration with (U.S. officials) to help mitigate threats to our nation's security," Young said in a statement.

U.S. Justice Department spokesman Charles Miller said officials were still reviewing the ruling, and declined to comment further.

In August, Union Pacific resolved part of its long-running dispute with the federal government over fines imposed over drug smuggling on trains crossing from Mexico. But the company proceeded with the lawsuit to challenge the agency's power to impose the fines and seize railcars.

The company and the U.S. Customs and Border Protection agency announced an agreement in August that covers about $500 million in fines the government had tried to impose and provides a five-year amnesty for Union Pacific. In exchange, Union Pacific railroad agreed to invest $50 million in efforts to strengthen security in the rail supply chain at the Mexican border without admitting any fault.

Union Pacific has said it is not practical for the railroad to patrol trains in Mexico because its security officers have no authority there and cannot carry guns. Plus, drug trafficking is a dangerous business. It owns 26 percent of Ferrocarril Mexicano, but says since it does not control the Mexican railroad and cannot force that business to make drug interdiction efforts.

According to the lawsuit, Customs and Border Protection agents found at least 4,514 pounds of marijuana hidden on Union Pacific trains, and on at least one occasion about 257 pounds of cocaine was also found. The drugs are often found in false compartments on the railcars. Thirty-seven of the seizures took place at the Calexico, Calif., crossing. Four happened at Nogales, Ariz., and one seizure happened at Brownsville, Texas.

Union Pacific has said customs inspections themselves often leave the trains vulnerable. While agents check the Mexican railroad crew's paperwork, railcars on trains up to two miles long can stretch back into Mexico and sit unprotected.

Under the agreement, the railroad will work with Customs to determine where to invest the $50 million. Some may go to improvements in Union Pacific's security, such as adding more personnel and drug dogs, and some may go toward improving Customs' operations at the border. Technological improvements, such as radio frequency identification and GPS tracking systems, may also be purchased.

The agreement said that Union Pacific representatives will be included in an information-sharing center where they will be able to coordinate efforts with government officials. Eventually, officials hope to develop a working group that will include freight railroads, major shippers and government officials to help address border security issues.

Union Pacific is the nation's largest railroad and operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.

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