FedEx pays $35.3 million to end NY lawsuit over illegal cigarettes

NEW YORK (Reuters) - FedEx Corp will pay $35.3 million to settle lawsuits in which New York state and New York City accused the company of shipping millions of untaxed cigarettes to residents over a decade.

The settlement announced on Monday resolves claims that FedEx knowingly violated a federal anti-cigarette trafficking statute, and a 2006 agreement with the state not to do business with sellers that ship cigarettes to people's homes.

New York officials said FedEx's conduct undercut their efforts to curb smoking, and cheated the state and city out of tax revenue from cigarette sales.

"Not only did FedEx violate laws created to protect the public from the serious health risks associated with cigarettes, but they also swindled New York City and State out of millions of dollars in tax revenue," state Attorney General Letitia James said in a statement.

Zachary Carter, New York City's corporation counsel, accused FedEx of shipping cigarettes "for the worst of reasons -profit."

FedEx did not immediately respond to a request for comment.

The settlement also requires FedEx to stop domestic shipments of cigarettes with "limited" exceptions, punish workers who knowingly arrange such shipments, and hire an independent consultant to monitor its compliance.

(Reporting by Jonathan Stempel in New York; Editing by James Dalgleish)