NEW YORK – New York Attorney General Eric T. Schneiderman
announced that his office has filed a $70 million lawsuit against FedEx for illegally
shipping nearly 80 million contraband cigarettes to consumers across New York
in violation of federal and state laws. The lawsuit joins and expands upon a
complaint filed in December 2013 in Manhattan federal court by the City of New
York and adds extensive claims of FedEx’s unlawful shipments around the
state.
A press release notes that the joint complaint alleges that,
between 2006 and 2012, FedEx made nearly 33,000 illegal shipments of cigarettes
to consumers in New York, amounting to more than 400,000 cartons of untaxed
cigarettes and a direct tax loss to the state of more than $10 million. Each
illegal shipment carries a maximum penalty of $5,000. The shipments violated an
agreement FedEx entered into with the state’s AG office in 2006, in which it
agreed to cease all unlawful cigarette deliveries to consumers both in New York
and throughout the country. The lawsuit further alleges that the company
engaged in a pattern of racketeering activity with various cigarette retailers
to traffic contraband cigarettes in violation of the federal anti-racketeering
statute.
“FedEx’s blatant disregard for its long-standing agreement
with New York, as well as federal and state law, enabled tens of millions of
cheap, untaxed cigarettes to be shipped to New Yorkers,” Attorney General
Schneiderman said. “Not only has FedEx cheated the state out of millions in tax
dollars — but many of these cigarettes may have ended up in the hands of
teenagers…”
The shipments by FedEx are prohibited by the federal
Contraband Cigarette Trafficking Act (CCTA) and Prevent All Cigarette
Trafficking (PACT) Act, as well as by New York State tax and public health
laws.
Because the federal PACT Act requires shippers to affix
specified labels identifying the contents as cigarettes and to report all sales
into a state, which FedEx did not do, New York is entitled to significant
penalties for these violations. Last, the Assurance of Compliance agreement
reached with FedEx in 2006 provides that that company must pay a stipulated
penalty of $1000 per violation, amounting to approximately $34 million.