NEW YORK -- Attorney General Eric T. Schneiderman and New York City Corporation Counsel Zachary W. Carter announced the filing a multimillion-dollar lawsuit against United Parcel Service Inc. (UPS) for illegally shipping nearly 700,000 untaxed cartons of cigarettes across state lines. Filed this week in Manhattan federal court, the civil suit—filed jointly by the State of New York and New York City—seeks an injunction to halt the contraband shipments and to collect damages and penalties for the trafficked cigarettes.
“Our lawsuit alleges that UPS blatantly disregarded New York and federal tax and public health laws, by shipping tens of millions of cheap, untaxed cigarettes to New Yorkers,” said Schneiderman. “We contend that UPS cost this state millions in revenue and is helping to make illegal, low-cost cigarettes available to our young people. If we are committed to discouraging our kids from smoking we must stop the flow of untaxed cigarettes.”
The $180 million suit accuses the company of costing the state and city more than $35 million in lost tax revenue through the more than 78,500 black market shipments between 2010 and 2014. Besides the lost tax revenue, the lawsuit alleges UPS’s actions violated federal anti-racketeering statutes and terms of a 2005 agreement with the AG’s office to cease all cigarette deliveries to unauthorized recipients (entitling the state and city to an additional $104 million and $78.5 million in damages).
"UPS has deliberately turned a blind eye to the fact that millions of dollars’ worth of untaxed cigarettes are shipped each year through its facilities,” said Carter, adding that the parties shipping cigarettes through UPS make significant profits by avoiding New York’s taxes. “Today’s action is intended to take the profit out of this enterprise for UPS and to seek penalties sufficient to discourage other common carriers from facilitating the illegal sale and delivery of untaxed cigarettes."
The joint investigation and lawsuit are based on documents subpoenaed from UPS. By the company’s own account, almost 36,000 illegal shipments were made to addresses in the five boroughs and at least 70 were marked as having been delivered to a minor. The black market cigarettes allegedly came from unlicensed cigarette vendors located in various New York Indian reservations.
In a statement to New York Daily News, UPS denied allegations that it consciously shipped contraband cigarettes.
“UPS tobacco policy strictly prohibits the shipment of cigarettes to consumers and unlicensed dealers or distributors, and we terminate service under that contract program if that policy is violated,” the statement said, adding that UPS “will vigorously defend our position.”
Schneiderman filed a similar lawsuit against FedEx in 2014. That $70 million suit is still pending.
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