Armstrong friend testifies he thought taxes were paid

From the News Sentinel:
Five times former longtime Knox County school board Chairman Sam Anderson met with federal authorities, and five times he says he told them the same thing — state Rep. Joe Armstrong assured him taxes on the pair’s cut of a profit from a sin tax hike were paid.

The taxes weren’t paid. Armstrong is now on trial for that. Anderson isn’t.

Anderson testified Wednesday in the federal trial of Armstrong, a Knoxville Democrat and 28-year veteran of the state Legislature, on charges the lawmaker plotted with accountant Charles Stivers to hide from the IRS — and the voting public — a windfall Armstrong and Anderson made from a 42-cent hike in the cigarette stamp tax in 2007. Armstrong voted for that hike.

The key question for jurors will be whether Armstrong “willfully” hid the profit by funneling it through Stivers’ investment firm or, as the lawmaker contends, he was misled by Stivers into believing the taxes were paid when Stivers instead pocketed the $76,000 Armstrong gave him.

On Wednesday, defense attorney Gregory P. Isaacs used Anderson’s testimony to drive home to jurors his contention Armstrong relied upon Stivers and to point out the disparity between the government’s treatment of Armstrong and Anderson.

…Armstrong didn’t have that much cash, so he went to longtime friend and distant relative Anderson.

“He said we had the opportunity to make an investment,” Anderson testified. “He said we had an opportunity to buy some stamps.”

Anderson didn’t need to hear the details. He was in.

The pair went to the now defunct BankEast, where Armstrong served on the board, and took out a loan for $250,000 using the stamps as collateral.

In the fall of 2008 — just more than a year after the hike went into effect — Anderson said Armstrong showed up at his office with a check for $88,301.

“I asked him did I owe any taxes, and Joe told me the taxes were already paid,” Anderson testified.

Armstrong even made a phone call in Anderson’s presence to confirm that payment, presumably with Stivers, although Anderson wasn’t paying attention and said he doesn’t know Stivers.

“At the time, I thought the taxes had been paid,” Anderson said. “I’m not a person of the world.”

So, Anderson, like Armstrong, did not report his profit on his 2008 tax return. Unlike Armstrong, the government allowed Anderson to file an amended return. He said he is working with a tax attorney now to handle that.

“Are you going to rely on your tax attorney?” Isaacs asked.

“Yes,” Anderson said.

Isaacs turned a knowing smile toward jurors.

Stivers, who has struck a plea deal, is expected to testify today.