Rep. Joe Armstrong indicted on fraud, tax evasion charges

From the News-Sentinel:
One of Tennessee’s and the nation’s most influential black state legislators bartered his vote on a cigarette tax hike for a cut in a scheme to hoard tax stamps at pre-hike prices and then sell them off once the Tennessee Legislature approved the bill, a federal indictment alleges.

State Rep. Joe Armstrong, D-Knoxville, who served as president of the National Black Caucus of State Legislators from 2012-2014 and twice was named the group’s Legislator of the Year, was indicted Wednesday in U.S. District Court.

Armstrong, 58, is charged in the indictment with conspiracy to defraud the U.S., tax evasion and lying to the IRS. He is expected to surrender to federal authorities Friday morning to be arraigned.

Court records show and Armstrong says in a statement provided by defense attorney Gregory P. Isaacs that he has been under investigation in the tax-stamp fraud case for “several years” — all while casting votes on legislation big and small, serving on the state House’s influential House Finance, Ways and Means Committee, heading the national black caucus and state democratic caucus and racking up prestigious awards.

Tax stamps, which are affixed to every pack of cigarettes sold in Tennessee, are akin to money as they are valued at whatever tax the state has set and are bought and sold like commodities. In 2006, Armstrong was part of a failed push to boost the cigarette tax, which was then 20 cents per pack.

In February 2007, fellow Democrat and then-Governor Phil Bredesen announced he, too, would be urging the Legislature to boost the tax by 40 cents per pack. Advocacy groups for various health organizations backed that effort.

Wholesalers began buying up the tax stamps in anticipation of the hike, which is legally permissible. But the hoarding was so rampant state Revenue Commissioner Reagan Farr put limits on how many of the stamps wholesalers could buy.

Assistant U.S. Attorney Charles Atchley Jr., who spearheaded the federal probe, alleges Armstrong’s motives in boosting the cigarette tax were far from an altruistic concern for the health of Tennesseans.

“Armstrong devised a scheme to profit from the expected increase,” Atchley wrote in the indictment. “It was a further part of the conspiracy that Armstrong would elicit others to invest and finance his scheme to surreptitiously profit from the increase in the Tennessee tax rate.”

Armstrong agreed with his unidentified co-conspirators he would use his position on the House finance committee to push through the tax hike while secretly amassing cash and brokering a deal with Tru Wholesale to buy the tax stamps before the hike was enacted, according to the indictment.

“Armstrong devised a scheme to profit from the expected increase,” Atchley wrote in the indictment. “It was a further part of the conspiracy that Armstrong would elicit others to invest and finance his scheme to surreptitiously profit from the increase in the Tennessee tax rate.”

Armstrong agreed with his unidentified co-conspirators he would use his position on the House finance committee to push through the tax hike while secretly amassing cash and brokering a deal with Tru Wholesale to buy the tax stamps before the hike was enacted, according to the indictment.

Note: This updates, expands and replaces earlier post. A copy of the indictment is HERE.