From the News-Sentinel:
A federal grand jury today indicted veteran Knoxville State Rep. Joe Armstrong on charges he used insider knowledge on a bill for which he voted to turn a $500,000 profit in a fraud and tax evasion scheme.
Armstrong is charged in an indictment filed in U.S. District Court with conspiring to defraud the United States, attempt to evade and defeat income taxes and fraud and false statements.
The indictment has not yet been served on the Democratic legislator. Assistant U.S. Attorney Charles Atchley Jr. took the case to the grand jury but declined to comment Wednesday. Contacted by the News Sentinel, Armstrong’s attorney, Gregory P. Isaacs, would not answer the newspaper’s questions but instead sent two statements via email, one from his firm and one from Armstrong.
“This investigation has been ongoing for a number of years,” Armstrong said in his statement. “I have a strong belief and respect for our system of justice. I look forward to addressing these allegations and the truth coming out in the very near future.”
The indictment alleges Armstrong, lauded in 2014 and 2006 as the National Black Caucus of State Legislators’ Legislator of the Year, cooked up a scheme beginning in 2006 “to profit from the expected increase in the state of Tennessee cigarette tax stamps.”
According to the document, then-Governor Phil Bredesen in January 2007 began publicly pushing to boost the tax on cigarettes, which then was 20 cents per pack. Wholesalers began buying up tax stamps at that rate in anticipation of the hike.
Armstrong hatched a scheme with a wholesaler to buy $250,000 worth of the stamps in a way that kept his name from being attached to the deal, voted to approve a tax hike of 42 cents and then sold off the stamps at the new 62-cent price, netting $500,000 as his cut of the profit, according to the indictment.
His accountant, Charles Stivers, already has pleaded guilty to his role in helping Armstrong hide his association with the deal by allowing Armstrong to funnel his profit through Stivers’ firm and then lying on Armstrong’s tax return so Armstrong could avoid paying income taxes.