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FedEx pays $35.4 million to end NY lawsuit over illegal cigarettes

Reuters  |  NEW YORK 

By Jonathan Stempel

NEW YORK (Reuters) - Corp will pay $35.4 million to settle three lawsuits in which New York state and accused the company of shipping millions of untaxed cigarettes to residents over a decade.

The settlement announced on Monday came after a ruled last Oct. 15 that had knowingly violated a federal anti-cigarette trafficking statute, and a 2006 agreement with the state not to ship cigarettes to people's homes.

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

They said knowingly shipped cigarettes on behalf of such companies as Kentucky-based Cigarettes Direct To You and Long Island-based Shinnecock Smoke Shop.

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

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

The settlement agreement requires Memphis, Tennessee-based FedEx to stop domestic shipments of cigarettes with "limited" exceptions, punish workers who knowingly arrange such shipments, and hire an to monitor its compliance.

FedEx did not admit or deny wrongdoing in entering the two-year agreement, which can be extended upon a material breach.

The company had no immediate additional comment.

In the Oct. 15 ruling, U.S. in Manhattan said it was "beyond doubt that certain FedEx employees knew that FedEx was shipping unstamped cigarettes," and held the company responsible for that knowledge.

The settlement came after U.S. in Manhattan ordered in May 2017 to pay the state and city $247 million in damages and penalties in a similar case.

A federal appeals court will in March consider UPS' appeal of that award, which the company said resulted from a "cavalcade of errors" by Forrest, who is now in private practice.

Cigarette prices in New York are among the highest in the

last year set a minimum price of $13 per pack, and this month banned cigarette sales at pharmacies.

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

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 14 2019. 23:05 IST