Toronto ? Canada has filed a $1 billion lawsuit claiming that tobacco companies smuggled exported cigarettes back into Canada to avoid paying taxes — and then pointed to the smuggling as evidence that cigarette taxes fueled the black market.

Police have called the conspiracy the biggest case of corporate fraud in Canadian history. The Royal Canadian Mounted Police have filed criminal charges against some of the same defendants, about a dozen companies falling under the R.J. Reynolds and Japan Tobacco groups.

The lawsuit, filed Wednesday, claimed tobacco companies exported cigarettes and then smuggled them back to avoid paying taxes imposed in 1991.

At the same time, the lawsuit said, the tobacco companies lobbied against the cigarette taxes by citing the smuggling operation they created as an example of the negative effect of higher taxes in Canada compared to the United States.

“A scheme was devised and implemented to gain illicit profits from the smuggling trade in tobacco products, resulting in substantial revenue loss” to Canada, the Justice Department said in a statement. The lawsuit seeks the profits the companies made on the scheme, along with damages.

It is the second lawsuit by Prime Minister Jean Chretien’s government against companies in the R.J. Reynolds and Japan Tobacco groups, including JTI-Macdonald Corp. The first, filed in 1999 in the United States, was dismissed on grounds that U.S. courts were unable to rule on Canadian tax matters.