By Karen Freifeld
NEW YORK (Reuters) - New York City and New York state sued United Parcel Service Inc. on Wednesday, seeking over $180 million in damages and penalties against the shipping company for allegedly delivering nearly 700,000 cartons of untaxed cigarettes across the state.
The lawsuit, filed in U.S. District Court in Manhattan, accuses UPS of cheating the state and city of $29.7 million and $4.7 million, respectively, in tax revenue, according to a statement from New York Attorney General Eric Schneiderman.
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The deliveries mostly originated from smoke shops on Indian reservations in New York state and were shipped to unlicensed wholesalers and retailers as well as residences in New York and nationwide, according to the lawsuit.
The deliveries, which violated both federal and state laws, were made despite a 2005 agreement between UPS and the state in which the company agreed to stop cigarette shipments to individual consumers and unlicensed dealers, Schneiderman said.
In an emailed statement, Atlanta, Georgia-based UPS denied the company knowingly shipped cigarettes to consumers and said it would "vigorously defend" its position. It said UPS went beyond federal and state law requirements in 2005 when it agreed to stop delivering cigarettes to consumers nationwide.
Last year, Schneiderman joined a similar lawsuit filed by the city in 2013 against FedEx Corp. That suit seeks at least $239 million in damages and penalties.
According to Schneiderman, UPS made more than 78,500 illegal shipments to consumers and other unauthorized recipients in New York state from 2010 to 2014.
The state wants UPS to pay $1,000 per violation, or penalties of $78.5 million, for violating the 2005 agreement. It also seeks $89.1 million in treble damages for the state and $14.1 million for the city under the federal racketeering statute for the loss of tax revenue.
The company "cost the state millions in revenue and is helping to make illegal, low-cost cigarettes available to our young people," Schneiderman said.
The case is State of New York, et al v. United Parcel Service, U.S. District Court, Southern District of New York, No. 15-01136.
(Reporting By Karen Freifeld; Editing by Chizu Nomiyama and Chris Reese)