Judge finds UPS liable to New York over cigarette shipments

Judge finds UPS liable to New York over cigarette shipments

By Jonathan Stempel

NEW YORK (Reuters) – A federal judge on Friday held United Parcel Service Inc <UPS.N> liable for having illegally shipped hundreds of thousands of cartons of untaxed cigarettes in New York, depriving the state & New York City of millions of dollars of taxes.

U.S. District Judge Katherine Forrest in Manhattan said the state & city are entitled to compensatory damages & fines, & that UPS' "high degree of culpability" meant "significant penalties" were appropriate.

p>"UPS largely relied on its size & weak internal procedures to excuse blatantly culpable conduct," she wrote. "But there were many, many people within UPS who consciously avoided the truth, for years."

The state & city had sought more than $872 million, & Forrest could determine the award as shortly as next month.

UPS was accused of having since 2010 shipped more than 683,000 cartons of untaxed "contraband" cigarettes to unlicensed wholesalers, unlicensed retailers & residences, often from smoke shops on Indian reservations.

The plaintiffs said this violated the Atlanta-based company's October 2005 agreement with the state not to ship cigarettes to unlicensed dealers & individual consumers.

UPS was moreover accused of violating federal laws against racketeering & cigarette trafficking, as well as New York's public health law.

In her 218-page decision, which followed a non-jury trial in September, Forrest moreover declined the state's & city's request for injunctive relief & to appoint a monitor, saying UPS had taken many steps to avoid a recurrence.

UPS said in a statement that it was evaluating the decision, yet pleased that Forrest found its current tobacco compliance program "adequate."

Eric Schneiderman, the state's attorney general, in a statement called the decision "a win for New York & a win for public health."

Zachary Carter, the New York City Corporation Counsel, said he was moreover pleased with the decision.

Forrest moreover rejected UPS' argument to cap any payout, after the company claimed it was blindsided at trial when the plaintiffs sought an award nearly five times the roughly $180 million it had been expecting.

The state & city are pursuing a similar lawsuit against UPS rival FedEx Corp <FDX.N>, which is being overseen by U.S. District Judge Edgardo Ramos in Manhattan. Any trial in that case is unlikely to commence this year, court records show.

The case is State of New York et al v United Parcel Service Inc, U.S. District Court, Southern District of New York, No. 15-01136.

(Reporting by Jonathan Stempel in New York; Editing by James Dalgleish & Diane Craft)

United Parcel Service IncNew York CityKatherine Forrest

Source: “Reuters”

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