UPS turned a "blind eye" to contraband cigarette shipments to New York State, abetting illegal tobacco sales and depriving state and New York City governments of millions of dollars in lost tax revenue, officials charged Wednesday.
A lawsuit seeking $180 million filed by the state and city claims that the carrier knew or should have known that nearly 80,000 shipments -- totaling nearly 700,000 cigarette cartons with almost 136 million cigarettes, most from American Indian reservations -- broke the law.
"This is an extraordinarily serious case of systematic corporate misconduct. This endangers the public health. It has robbed taxpayers and flies in the face of the rule of law," New York State Attorney General Eric T. Schneiderman said. His office filed the suit on Tuesday in federal court in Manhattan jointly with the city corporation counsel, Zachary W. Carter.
A spokeswoman for Atlanta-based UPS disputed the allegations.
The bootleg cigarette shipments went to nearly every part of the state, including Long Island and the five boroughs, according to officials.
Schneiderman's office said the state lost $29.7 million in revenue and the city $4.7 million during the period covered by the lawsuit, 2010 to 2014. Additionally, they say, the untaxed cigarettes undermined efforts to discourage underage smoking because pricier, legally sold cigarettes make the habit more expensive.
The suit, which asks a court to issue an injunction imposing restrictions on untaxed cigarette shipments, claims that UPS broke an October 2005 settlement agreement made with then-Attorney General Eliot Spitzer to halt such shipments.
The authorities say that a carrier can easily deduce the content of the shipments.
"It's something that any of your teenage kids . . . could accomplish, and that's simply . . . Google them," Carter said of prospective customers. "Find out whether they advertise the sale of cigarettes, discounted cigarettes, untaxed cigarettes."
The attorney general's office filed a similar lawsuit last year against FedEx. The case is pending. In a statement, FedEx spokeswoman Meredith Heighington Miller declined to answer questions but sent a written statement saying the government's claims "lack legal foundation."
UPS spokeswoman Susan Rosenberg said the company disputes the allegations, adding that the company's policy "strictly prohibits the shipment of cigarettes to consumers and unlicensed dealers or distributors, and we terminate service . . . if that policy is violated."
"The question is, did we knowingly make those shipments?" Rosenberg said. The answer, she said, is no.
"It's not the role of the common carrier -- that would be UPS as the carrier -- to be a tax collector for state and local governments," she said.