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May 19, 2019

EXCLUSIVE: FedEx forced to cough up $35.3 million in settlement over shipping illegal cigarettes

January 14, 2019
The settlement ends three lawsuits accusing FedEx of partnering with outlaw cigarette traffickers selling untaxed smokes in the Big Apple and throughout the state for a decade. (fotograv / Getty Images)

FedEx got smoked.

The shipping company will have to pay a whopping $35.3 million under a settlement with the state Attorney General over claims the company delivered hundreds of thousands of illegal cigarettes to New Yorkers, the Daily News has learned.

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The settlement ends three lawsuits accusing FedEx of partnering with outlaw cigarette traffickers selling untaxed smokes in the Big Apple and throughout the state for a decade.

“FedEx knowingly engaged in illegal and harmful behavior at the expense of New Yorkers’ health,” Attorney General Letitia James said. “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.”

New York City’s cigarette taxes are among the highest in the nation. Last year, the city implemented a new tax increase that set the minimum price for a pack at $13. The sale of cigarettes was also banned in city pharmacies earlier this month.

But the sale of illegal, untaxed cigarettes in the city remains common, with packs often going for $10.

“For the worst of reasons – profit – FedEx shipped millions of untaxed cigarettes to residents,” said City Corporation Counsel Zachary Carter.

In addition to the $35 million payout, the settlement requires FedEx to hire a consultant to ensure it’s following the law, provide compliance reports to the city and state and institute internal reforms.

Those reforms include punishing workers involved in illegally shipping tobacco, worker training and ending domestic shipments of cigarettes.

The Attorney General and the City Law Department, which Carter heads, partnered in the probe into the publicly-traded, Memphis-based company.

“As a transportation company, we remain committed to complying with the law,” FedEx spokesman Perry Colosimo said. “We will also continue to honor the privacy of our customers.”

The deal with FedEx comes just months after a Manhattan federal court judge ruled the company had run afoul of a federal statute prohibiting cigarette trafficking, as well as a 2006 agreement with the state Attorney General to halt residential cigarette deliveries.

““It is beyond doubt that certain FedEx employees knew that FedEx was shipping unstamped cigarettes,” wrote Judge Edgardo Ramos in an opinion issued in October.

According to a statement from James’ office, the $35 million settlement is “substantially more than the amount of the tax loss” with the additional amount based on longstanding conduct that was “pervasive throughout the company.”

Increased cigarette taxes over the years have led to a decrease in the number of smokers, according to experts.

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