Armstrong convicted, loses House seat

From the News Sentinel
After four days of testimony and five hours of deliberations, a federal jury served up one felony conviction for state Rep. Joe Armstrong on filing a false tax return and an acquittal on two other related felonies.

Armstrong, a 28-year veteran of the Legislature who just last week won his unopposed Democrat primary race, faces a maximum of three years in prison on the false tax return count, but sentencing guidelines likely will be lower.

The jury acquitted Armstrong of conspiring with his accountant, Charles Stivers, to defraud the IRS by hiding his windfall from a sin tax hike through Stivers’ investment firm and of evading taxes, which, unlike the false return charge, required a “willful,” or deliberate act.

Assistant U.S. Attorney Charles Atchley Jr. said he will seek a prison term for Armstrong. Senior U.S. District Judge Thomas Phillips set a Nov. 30 sentencing hearing. Armstrong remains free under previous terms of his release.

Armstrong and defense attorney Gregory P. Isaacs left U.S. District Court following the verdict’s announcement and did not take questions.

Armstrong made roughly $321,000 when he used Knoxville tobacco wholesaler Tru Wholesale to buy cigarette tax stamps for him at the 2006 rate of 20 cents per pack and then sell them after a 42-cent hike went into effect in 2007. Armstrong voted for the tax hike.

It was not a crime for the lawmaker to profit from a law on which he voted, nor was it a crime for Tru Wholesale owners Boyd Wyatt and Roger Cox to cut Armstrong in on the deal to hoard tax stamps until the hike went into effect. Hiding the money from the IRS, however, is criminal.

Atchley said he could not speculate on why jurors acquitted Armstrong in the conspiracy and evading counts, which both carried maximum five-year prison terms. But the key witness to Armstrong’s alleged willfulness to conspire to cheat the IRS and evade taxes was Stivers, who turned out to be a thief and a liar who stumbled on the witness stand several times under cross-examination, pausing for long periods before conceding he told a series of lies as the probe developed.

The false tax return charge rested more on the fact that Armstrong did not list the windfall on his return than any deliberate evasion.

Atchley said authorities first linked Armstrong to the case during an IRS audit of tobacco companies. Testimony showed agents first confronted Stivers, who lied about the source of the money his firm paid Armstrong, in October 2013. The U.S. attorney’s office sent Armstrong a target letter, notifying him of the IRS probe and his role as a suspect, in December 2013. Armstrong has consistently denied he plotted to evade his taxes.

…A felony conviction disqualifies Armstrong, who ran unopposed in Thursday’s Democratic primary, from seeking office, and the local Democratic Party has 40 days before the Nov. 8 election to nominate a new candidate, said Adam Ghassemi, spokesman for Tennessee Secretary of State Tre Hargett.

That gives local Democrats until noon on Sept. 29, which Knox County Democratic Party Chairman Cameron Brooks called “a good amount of time.”

“The folks that need to get together in the party will do what we need to do,” Brooks said Monday after the verdict. “The only thing I’ll say, with it all coming back pretty fast, is I just feel for Joe and his family. He is in my thoughts and prayers. “He’d been a good advocate for our community and everyone makes mistakes, I’ll let the verdict speak for itself.”

Isaacs said in a statement: “Rep. Armstrong wants to thank his family friends and constituents for their prayers and support. Rep Armstrong is currently evaluating all his options.”