UPS ordered to pay $247m fine for shipping untaxed cigarettes
The practice of shipping hundreds of thousands of cartons of untaxed cigarettes between Indian reservations, unlicensed dealers and customers in private residences in New York State cost the state and New York City millions in taxes, Federal District Court Judge Katherine B. Forrest said in a 218-page decision on Thursday.
It also violated a 2005 agreement between and UPS and the state in which the shipping company agreed not to deliver cigarettes to unlicensed recipients, she wrote.
The ruling in the lawsuit, filed in 2015, awards $165.8 million to the state and $81.2 million to New York City. UPS said it would appeal the decision.
State Attorney General Eric Schneidermann, who has made the health effects of cigarette smoking a target, said in court testimony in September that UPS' actions disproportionally attracted young people to cigarette smoking by lowering costs, and weakened the state's anti-smoking efforts.
UPS lawyer Carrie Cohen argued in court that the city and state mistook cartons of "little cigars" for those of cigarettes, adding that the company is in full compliance with the law.
After the judge's decision she said the award was a "ridiculously high number."
Forrest, in her ruling, said a "very significant award" was necessary because of the danger of smoking, and that the court "is convinced that modest penalties would not make a significant corporate impact on UPS." ■