NY State Sues FedEx for Illegal Cigarette Shipments

NY State Sues FedEx for Illegal Cigarette Shipments
In this Monday, Dec. 2, 2013, file photo, a worker loads a container onto a FedEx cargo plane at the FedEx hub at Los Angeles International Airport in Los Angeles. (AP Photo/Jae C. Hong, File)
Kristina Skorbach
3/31/2014
Updated:
3/31/2014

New York Attorney General Eric Schneiderman announced a $70 million lawsuit against FedEx Corp., the Memphis, Tenn.-based global courier company, for illegally shipping $80 million of untaxed cigarettes to consumers.

An investigation also found that FedEx moved 33 thousand shipments of untaxed cigarettes to the state since 2006. The over 400,000 cartons represent a direct tax loss of over $10 million.

FedEx signed an agreement with the state to cease all unlawful imports of cigarettes in 2006, but last December the city of New York filed a complaint in Manhattan federal court which alleged a slew of unlawful shipment claims against FedEx.

Each illegal shipment carries a maximum penalty of $5,000.

“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, who are particularly vulnerable to low-priced cigarettes,” Scheneiderman said in a release.

Contraband shipments are prohibited by the federal Contraband Cigarette Trafficking Act (CCTA) and the Prevent All Cigarette Trafficking (PACT) Act, as well as by New York State tax and public health laws.

FedEx says the claims lack legal foundation and it supports efforts to stop illegal cigarette distribution.

“While we work closely with all legal and regulatory authorities to ensure our networks are not inappropriately used for the shipment of prohibited items, we must also protect the privacy of our customers and will not open packages to determine their contents without reason,” FedEx said in the statement. 

Governor Cuomo’s Response

In response to the investigation, Gov. Andrew Cuomo announced Monday a Cigarette Strike Force that will crack down on illegal tobacco trafficking and sales.

The multi-agency group is comprised of state, local, and federal agencies dedicated to stopping the influx of counterfeit and untaxed tobacco products into New York. Strike Force will also trace any illicit financial earnings from the criminal activity.

“Would-be traffickers are now on notice: They will be caught and they will be brought to justice,” Cuomo said in a release.

The current tax on a pack of 20 cigarettes in New York State is $4.35, and in New York City there is an additional $1.50 in tax. The penalty for possession of unstamped cigarettes is $600 per carton and possible criminal charges.

Assets seized during Strike Force investigations will be shared among participating agencies. Members of the Strike Force include:

    · New York State Department of Taxation and Finance

    · United States Bureau of Alcohol, Tobacco, Firearms and Explosives

    · United State Custom and Border Protection

    · United States Department of Homeland Security

    · United States Food and Drug Administration

    · New York County District Attorney’s Office

    · Richmond County District Attorney’s Office

    · Rockland County District Attorney’s Office

    · Cattaraugus County Sheriff’s Department

    · Erie County Sheriff’s Department

    · New York City Sheriff’s Office

    · Niagara County Sheriff’s Office

    · Suffolk County Police Department