FedEx Ground Package System has agreed to pay more than $35 million to resolve claims over illegal cigarette deliveries to residents throughout New York City and State made by the company over a 10-year period.
“This settlement resolves three lawsuits against FedEx alleging that it partnered with cigarette trafficking businesses to illegally ship hundreds of thousands of untaxed cigarettes to New Yorkers. In addition to the payment, FedEx will implement internal reforms and hire an independent consultant that will oversee FedEx’s compliance with the law and provide compliance reports to the City and State,” said the New York Attorney General, Letitia James, and City Corporation Counsel, Zachary W. Carter, in a statement.
The settlement follows a ruling in October 2018 which found that FedEx’s conduct over many years for customers with such names as “Cigarettes Direct To You” established without the need for a trial that FedEx had knowingly violated a federal anti-cigarette trafficking statute and a 2006 Assurance of Compliance with the New York Attorney General’s Office in which, to avoid prosecution, FedEx expressly agreed to cease residential cigarette deliveries and comply with a New York law prohibiting those deliveries.
“For years, FedEx knowingly engaged in illegal and harmful behavior at the expense of New Yorkers’ health,” said Attorney General Letitia James. “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. Let this serve as a message that we will never allow companies – however large or small – to cheat or harm New Yorkers.”
In its own statement, FedEx said: “FedEx Ground has reached an agreement with the City and State of New York to settle this case for $35.4 million. The plaintiffs originally sought nearly $700 million.
“The FedEx networks handle more than 15 million shipments each day. We remain committed to complying with the law and to cooperating with federal and state law enforcement agencies as appropriate. By tendering shipments to FedEx, our customers warrant that their shipments do not violate our stated terms and conditions.”
The statement went on to underline that since well before the execution of the Settlement Agreement, tobacco and tobacco products have been a prohibited item that shippers expressly agree not to tender for shipment in FedEx networks.
“More than half of cigarettes purchased in New York are sold on the black market. Yet, despite repeated requests for New York City and State to share information about shippers which they knew to be violating our terms and conditions, both the Attorney General and the City generally refused to do so.”
It noted that on the few occasions that this information was shared with FedEx, evidence in the litigation confirmed that cooperation to be highly effective. Communications between the City Attorney and the Attorney General's Chief of Tobacco Compliance Bureau acknowledged that, when alerted of potentially illegal activity by authorities, FedEx had taken “appropriate action against the local affiliate that violated the Assurance of Compliance.”
The company added that it has obtained in the settlement a full release of claims against any FedEx entity.
“FedEx will engage the services of an independent consultant with specialized knowledge of cigarette trafficking to assist in the identification and interdiction of any such shipments into New York. We will also continue to honor the privacy of our customers, who trust us to transport their packages safely and securely,’’ the statement concluded.
