In N.Y. tobacco suit, UPS told to pay up

United Parcel Service Inc. was ordered by a judge to pay $247 million to the state and city of New York for turning a blind eye to shipments of untaxed cigarettes from American Indian reservations that undermined antismoking efforts.

U.S. District Judge Katherine Forrest in Manhattan said she wanted to send a message to the most senior executives at UPS about the cost of misconduct. Modest penalties, she said, “would not make a sufficient corporate impact” on the company.

“Significant penalties are appropriate given the public harm specifically sought to be addressed by the statutes at issue and given the egregious and prolonged nature of UPS’s conduct,” Forrest said in her ruling Thursday. “The court is also troubled by UPS’s consistent unwillingness to acknowledge its errors; UPS has persisted in claiming it did nothing wrong.”

The decision comes two months after Forrest concluded that UPS had failed to comply with a 2005 deal it struck with the state by continuing to service contraband cigarette enterprises operating out of smoke shops on Indian reservations throughout New York. UPS argued that it complied with the law and that the dispute was triggered by the city and state mistaking cartons of legally shipped “little cigars” for cigarettes.

The company pledged to appeal.