A federal judge on Monday declined to throw out a lawsuit brought by New York City against a suspected ring of smugglers that allegedly sold millions of cigarettes without paying local taxes.
The city in April filed a civil racketeering suit against over two dozen sellers and distributors of cigarettes, claiming they avoided paying more than $6.5 million worth of city taxes on 437,721 cartons of cigarettes.
Between 2003 and 2009, the city said the defendants at the center of the suspected scheme, operating under the name 2U.com, ran a "classic bootlegging operation, modernized with the Internet."
In its lawsuit, the city said one group of defendants would buy tax-free wholesale cigarettes from suppliers across the country, and then sell them online and on the phone to a network of retailers in the city. The suppliers were also named as defendants.
In refusing to dismiss the action, U.S. District Judge Barbara Jones in Manhattan said the city had standing to bring the case, which was brought under federal racketeering laws and the Contraband Cigarette Trafficking Act.
"We have successfully fought those who tried to find tax loopholes, and we will continue to fight those who try to skirt the law," Corporation Counsel Michael Cardozo said in a statement.
Nora Coleman, a lawyer for one group of defendants, declined to comment on the ruling.
The case is The City of New York v. Israel Chavez et al., U.S. District Court for the Southern District of New York, No. 11-2691.
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