Shipping giant UPS is facing a multimillion dollar lawsuit that alleges the company illegally shipped nearly 700,000 untaxed cartons of cigarettes across New York State.

The lawsuit, filed by New York State Attorney General Eric Schneiderman and New York City Corporation Counsel, alleges that based on subpoenaed UPS documents, UPS made more than 78,000 illegal shipments of untaxed cigarettes or 683,000 cartons from unlicensed vendors on Indian Reservations across the state.

Schneiderman's complaint says that UPS made the shipments between 2010 and 2014, in violation of Federal and State laws as well as a settlement between UPS and the State Attorney General's Office in 2005, where UPS agreed to stop all cigarette deliveries to unauthorized recipients including homes and unlicensed dealers in New York and the U.S.

The unlicensed sale of cigarettes during that period resulted in a loss of tax revenue of $29.7 million to New York State and $4.7 million to New York City.

"Our lawsuit alleges that UPS blatantly disregarded New York and federal tax and public health laws, by shipping tens of millions of cheap, untaxed cigarettes to New Yorkers," Attorney General Schneiderman said. "We contend that UPS cost this state millions in revenue and is helping to make illegal, low-cost cigarettes available to our young people, who are disproportionally lured to smoking by lower costs. If we are committed to discouraging our kids from smoking we must stop the flow of untaxed cigarettes. To limit smoking, which remains the number one preventable public health crisis today, we must stop the flow of illegal cigarettes and enforce the law."

The lawsuit also accuses UPS of racketeering by using various cigarette dealers to move the illegal cigarettes, which is a violation of Federal anti-racketeering laws.

The complaint further alleges that almost 36,000 of the deliveries went to addresses in the Five Boroughs of New York City and at least 70 were marked in UPS's own records as having been handed to a child, which is illegal under New York law.

Under the agreement reached between UPS and Schneiderman's office in 2005, the company must pay a $1,000 penalty for each violation, which in this case, amounts to $78.5 million.

The lawsuit is seeking damages and penalties totaling over $180 million for damages to the state and city.

UPS strongly denies the charge, saying its policies strictly prohibit the shipping of cigarettes, and will vigorously fight the lawsuit.

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