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N.Y. sues FedEx over cigarettes

BY LARRY NEUMEISTER Associated Press

NEW YORK - FedEx has cost New York state more than $10 million by unlawfully shipping contraband cigarettes to consumers, the state's attorney general said Monday as his office joined a lawsuit brought against the company last year by New York City officials. Attorney General Eric T. Schneiderman said he is seeking $165 million in penalties beyond the $70 million sought in the lawsuit and the recovery of $10 million that the shipments cost the state's tax revenues.

FedEx Corp., based in Memphis, Tenn., as accused in the lawsuit in federal court in Manhattan of making nearly 33,000 illegal shipments of cigarettes to New York consumers between 2006 and 2012, which would violate a 2006 deal the state struck with FedEx that included a promise by the company that it would no longer make illegal cigarette deliveries.

"FedEx's blatant disregard for its long-standing agreement with New York, as well as federal and state law, enabled tens of millions of cheap, untaxed cigarettes to be shipped to New Yorkers," Schneiderman said. "Not only has FedEx cheated the state out of millions in tax dollars, but many of these cigarettes may have ended up in the hands of teenagers, who are particularly vulnerable to low-priced cigarettes."

In a statement, FedEx said the claims by the city and state "lack legal foundation." It noted that no shippers or recipients of cigarettes were being sued.

"Instead, the city and state have chosen to target us for our role as a carrier," FedEx said. "While we work closely with all legal and regulatory authorities to ensure our networks are not inappropriately used for the shipment of prohibited items, we must also protect the privacy of our customers and will not open packages to determine their contents without reason." The company added that it fully supports New York's efforts.

"We intend to continue working with the city, state and all applicable regulatory agencies while vigorously defending this case," FedEx said.

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