Mayor Michael R. Bloomberg and Corporation Counsel Michael A. Cardozo today announced a lawsuit filed by the City in the Federal District Court for the Eastern District of New York against the King Mountain Tobacco Company and its owners for illegally selling and distributing untaxed cigarettes in New York. The suit alleges that King Mountain, located in Washington State, manufactures cigarettes and sells them to unlicensed dealers in New York State in violation of Federal statutes. Sales of untaxed cigarettes deprive the City and State of millions of dollars in lost cigarette tax revenues and undercut public health measures designed to discourage smoking, especially by teenagers. This is the first lawsuit filed under the federal PACT Act, sponsored by Rep. Anthony Weiner, which governs cigarette sales in which consumers and cigarette sellers are not in the presence of one another.

"Out-of-state manufacturers who evade taxes hurt our law-abiding small businesses and cost New Yorkers millions of dollars in lost tax revenue," said Mayor Bloomberg. "New York City has won significant victories in the courts against illegal cigarette sellers within the state, and now we are extending that fight to out-of-state cigarette sellers who flagrantly violate federal laws."   

"This is exactly how Congress envisioned this law being used," said Rep. Anthony Weiner. "The Bloomberg administration is correct and courageous in taking these steps to protect the lives of underage smokers and the pocketbooks of New York taxpayers."

"This lawsuit continues the City's efforts previously commenced against Internet cigarette sellers to halt sales by out-of-state distributors that violate state and city tax laws. We are sending a message to out-of-state cigarette distributors who sell illegally - New York City will fight to protect public health and to collect taxes owed to the City and the State," said Corporation Counsel Michael A. Cardozo.

The City's action is brought against King Mountain, and an affiliated company known as Mountain Tobacco Distributing Company, both located in White Swan, Washington and two owners of the companies, Delbert Wheeler, Sr., and Richard "Kip" Ramsey. The City's suit alleges that the King Mountain defendants made numerous shipments of unstamped cigarettes on which taxes had not been paid to New York City and State, in violation of three federal statutes, the Contraband Cigarette Trafficking Act, the recently-enacted Prevent All Cigarette Trafficking Act ("PACT Act"), and the Racketeer Influenced Corrupt Organization Act ("RICO").

The City strongly supported passage of the PACT Act, which became effective in June 2010, and this lawsuit is the first one brought under the Act. The PACT Act, which governs cigarette sales in which consumers and cigarette sellers are not in the presence of one another, imposes reporting and other compliance requirements on interstate sales of cigarettes, including a requirement that the seller assure that taxes on the cigarettes have been paid prior to shipment into the state of delivery. The City's suit alleges that the sales were made to individuals on the Poospatuck Reservation in Mastic, Long Island, to persons against whom the City had already obtained an injunction against sales of untaxed cigarettes. The action against King Mountain also seeks an injunction against further sales of untaxed cigarettes by King Mountain and damages, civil penalties and attorneys fees.