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VOL. 40 | NO. 31 | Friday, July 29, 2016

Federal trial of Tennessee state lawmaker starts today

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NASHVILLE (AP) - Just days before Tennessee's primaries, one veteran state lawmaker won't be battling on a ballot, but in federal court fighting fraud and tax evasion charges.

Democratic state Rep. Joe Armstrong of Knoxville did not draw a primary challenger, but nonetheless finds himself possibly fighting for his political life.

Federal prosecutors allege that Armstrong conspired with his accountant to profit from a 2007 state cigarette tax hike, and then tried to hide the more than $318,000 in earnings from the IRS. His trial begins Tuesday with jury selection.

At the center of the case is to what degree, if any, Armstrong's position as an elected official played in the scheme. The accusation, in short, is that Armstrong purchased $250,000 worth of cigarette tax stamps before the legislature tripled the tax, only to resell the stamps for big profit. The profit, prosecutors say, was not reported to the IRS.

Armstrong's attorney, Gregory Isaacs, says that the charges against the long-serving state representative have nothing to do with his position.

Isaacs unsuccessfully sought to keep the defendant's role as a state lawmaker from the jury, arguing that it would require a more complex defense than the charges would normally call for.

"He was an innocent taxpayer that relied on a tax professional," Isaacs argued in a pre-trial hearing. "I'm going to be forced to combat a political corruption case instead of a tax evasion case. It doesn't matter if he's an elected official or a farmer - the question is did he intentionally defraud the government?"

Armstrong's accountant, Charles Marshall Stivers of Manchester, Kentucky, earlier pleaded guilty to a related fraud charge in 2015.

Assistant U.S. Attorney Charles Atchley Jr. said secretly-recorded conversations show that Armstrong's role as a politician played a key part.

"The United States intends to prove Mr. Armstrong was motivated from the very start to hide this money and knew from the very start he had to hide this money," Atchley said. "He said from the very beginning, 'No one can know about this. I can't be seen to profit from Big Tobacco' - his words."

The indictment alleges that Armstrong devised a scheme beginning in 2006 to profit from the cigarette tax hike planned by then-Gov. Phil Bredesen, a fellow Democrat. According to the charges, Armstrong borrowed $250,000 to buy tax stamps at the old 20-cent rate, and then sold them at a profit after lawmakers raised the tax to 62 cents in June 2007.

Armstrong was by Bredesen's side when he toured East Tennessee in 2007 to promote the hefty 42-cent cigarette tax increase to help fund an increase in education funding. Armstrong said at the time the tax should have been raised even higher.

According to Stivers' plea agreement, the return on the purchase of $250,000 worth of tax stamps was $750,000 and he agreed to a 15 percent cut for funneling the proceeds through his bank.

The Knoxville News Sentinel reports that Armstrong, who has pleaded not guilty, is expected to take the stand.

Armstrong became Knox County's youngest commissioner in 1982, and would be elected to represent House District 15 in 1988. He is tied with two other lawmakers as the longest-serving members in the House. He's known for strongly advocating for minority viewpoints, yet willing to work with Republicans on business-related matters.

Armstrong is a former chair of the Tennessee Legislative Black Caucus and the state House Democratic Caucus elected him the new position of leader pro tem last year. Armstrong resigned from that leadership post following the indictment, but has remained a vocal member of the state House while pending trial.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 0 0
MORTGAGES 0 0 0
FORECLOSURE NOTICES 0 0 0
BUILDING PERMITS 0 0 0
BANKRUPTCIES 0 0 0
BUSINESS LICENSES 0 0 0
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0