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The lawsuit maintains that the shipments were in clear
violation of both federal and state laws, as well as a
settlement UPS entered into with the New York State
Attorney General’s Office in 2005, in which UPS agreed
to cease all cigarette deliveries to unauthorized
recipients, such as residences and unlicensed dealers,
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
dealers to traffic contraband cigarettes in violation of
the federal anti-racketeering statute.
Of
the total number of UPS deliveries in New York State,
the complaint alleges that almost 36,000 went to
addresses in the five boroughs and at least 70 were
marked in UPS’s own records as having been handed to a
child. Under
New York
law, it is illegal to sell cigarettes to minors. The
joint investigation and lawsuit are based on subpoenaed
UPS documents, which allegedly show that UPS made tens
of thousands of shipments of cigarettes to
New York consumers from
unlicensed cigarette vendors located on Indian
Reservations throughout the state.
As
outlined in the complaint, the shipments violated New
York Public Health Law 1399-ll, which prohibits, among
other things, direct shipment of cigarettes to homes or
residences in the state. In addition, as these
cigarettes allegedly did not bear
New York
State or New York City tax stamps, the shipments
violated the federal Contraband Cigarette Trafficking
Act (CCTA), which specifically prohibits shipments of
more than 10,000 untaxed cigarettes in a jurisdiction
where cigarette tax stamps are required by state or
local law.
The alleged shipments by UPS are also prohibited by the
federal Prevent All Cigarette Trafficking (PACT) Act and
by New York State
tax law. With multiple violations of the federal CCTA,
UPS engaged in a pattern of racketeering activity with
the various cigarette dealers. Thus, the lawsuit
maintains that
New York
State is entitled to
treble damages under the federal Racketeer Influenced
and Corrupt Organizations Act, also known as the RICO
Act, amounting to over $89 million.
The Assurance of Discontinuance agreement reached
with UPS in 2005 provides that that company must pay
the State a stipulated penalty of $1000 per
violation, amounting to approximately $78.5 million.
The complaint seeks damages and penalties totaling
over $180 million. The UPS lawsuit is similar a $70
million joint suit filed against FedEx in 2014 for
allegedly shipping illegal cigarettes to New
Yorkers.
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