NYC Reaches $5M Deal on Bootlegged Smokes

MANHATTAN (CN) - New York City agreed Wednesday to take 10 percent of the $53 million it sought from last-mile delivery service LaserShip for shipping untaxed cigarettes.

The Big Apple had accused LaserShip last year of smuggling 75,000 cartons of cigarettes from the Seneca Nation, which was not a party to the action. In addition to damages of about $3 million, the city sought a civil penalty of up to $50 million.

It said the large East Coast courier had partnered with a group of upstate smoke shops to deliver untaxed cigarettes to residential customers in New York City and New Jersey.

The Prevent-All-Cigarette-Trafficking Act, passed in 2010, prohibits the U.S. Post Office from carrying cigarettes in the mail.

City attorneys announced Wednesday that LaserShip agreed to a $5 million settlement. The announcement comes about two months after U.S. District Judge George Daniels refused to dismiss the case.

Noting that LaserShip "has strengthened its compliance practices," the city said an end to the company's cigarette shipments is also at hand.

"The $5 million resolution of the case is well in excess of the city's actual $1.9 million tax loss, reflecting the fact that the laws under which the city's claims were made provide for substantial civil penalties for the deliveries at issue," a statement on the deal says.

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