Category Archives: Joe Armstrong

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. Continue reading

Armstrong jury asks question, takes weekend off

From the News-Sentinel’s Jamie Satterfield:
After just more than an hour of deliberations Friday, a federal jury pondering the fate of state Rep. Joe Armstrong on tax fraud charges had a question and a request.

The eight-woman, four-man jury wanted to know what Tennessee law says about the “culpability of a citizen using a paid preparer,” and they wanted a calculator.

Senior U.S. District Judge Thomas Phillips refused to answer the question, telling jurors “all the relevant law involved in this case has been provided to you,” and denied the calculator request.

With that, the jury opted to go home for the weekend. Deliberations resume Monday.

The question puzzled both sides since Armstrong is charged with violating federal law, not state statutes. But the query was in step with Armstrong’s defense that he relied upon the advice of his longtime accountant, Charles Stivers, to handle the taxes on a windfall the veteran lawmaker made on a 2007 sin tax hike.

Armstrong has been standing trial this week on charges he conspired with Stivers to hide from the IRS — and the voting public — his profiteering from a cigarette tax stamp hike that his vote helped pass. He is also charged with tax evasion and filing a false tax return.

The line of demarcation between prosecutors Charles Atchley Jr. and Frank Dale and defense attorney Gregory P. Isaacs is simple — either Stivers, a confessed liar and thief, told the truth when he said Armstrong told him to launder the $321,000 through Stivers’ company to hide its source or Armstrong is a victim of Stivers, who lied to the lawmaker and stole the money meant to go toward Armstrong’s taxes.

Armstrong testimony: Deceived by lying accountant

From the News Sentinel
After nearly three hours on the witness stand Friday, State Rep. Joe Armstrong ended his testimony where his defense began four days earlier — he trusted an accountant who turned out to be a liar and a thief.

Armstrong testified in his own defense Friday in U.S. District Court where he is standing trial on charges he conspired with his longtime accountant, Charles Stivers, to cheat the IRS and hide from the public a windfall he made from a sin tax hike for which he voted.

Armstrong has maintained since the trial’s start Stivers, a confessed liar and thief, assured him taxes on the $321,000 windfall from a deal involving a 2007 cigarette tax stamp hike had been paid but instead stole the money. He repeated that assertion in both his direct testimony under questioning by defense attorney Gregory P. Isaacs and cross-examination by Assistant U.S. Attorney Charles Atchley Friday.

“Mr. Atchley, Mr. Stivers was my tax attorney,” Armstrong testified. “I believed in him. I’m telling you, I relied on Mr. Stivers.”

Armstrong began his testimony with an autobiography of a native Knoxville resident who worked to put himself through the University of Tennessee. His interest in politics began at age 23, when he worked for a local radio station and rubbed elbows with politicians. He was the first Democrat to win a slot as vice chairman of the Knox County Commission and has served in the state Legislature for 28 years. He is a married father of four.

“This is my 14th term,” he said, noting he won his primary as an unopposed candidate on Thursday, a day he spent in court. Continue reading

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.

Testimony: Tobacco dealer paid $30K to meet Armstrong

Robert Carter, who set up the initial meeting between state Rep. Joe Armstrong and a tobacco wholesaler, testified Wednesday in the legislator’s trial on charges of conspiracy and tax evation in the deal developed after the meeting.

Further from the News Sentinel:

Carter testified Wednesday that he brokered a meeting between the veteran lawmaker and Knoxville-based tobacco wholesaler Boyd Wyatt that would ultimately lead to a deal that netted Armstrong roughly $321,000 in profit from a 2007 cigarette stamp tax hike Armstrong voted to approve.

Armstrong is standing trial this week in U.S. District Court on charges of conspiring with his accountant, Charles Stivers, to hide that profit from the IRS — and the voting public — as well as charges of tax evasion and filing a false income tax return.

Until this week, Carter’s role had not been revealed. Also kept under wraps until this week’s trial is the fact that Wyatt’s firm, Tru Wholesale, paid Carter $30,000 to set up a meeting with Armstrong.

Carter testified it wasn’t the first time he charged a “fee” for introducing people to Armstrong. The lawmaker, however, was unaware of Carter’s profiteering off his friendship with Armstrong, he said.

“Sure, he would have been mad,” Carter said of the lawmaker’s reaction if he had discovered Carter’s profiteering. Continue reading

AP story on opening day of Armstrong trial

By Erik Schelzig, Associated Press
KNOXVILLE, Tenn — A longtime Tennessee state lawmaker parlayed his position of power to orchestrate a scheme to secretly reap more than $300,000 in untaxed earnings, federal prosecutors told jurors on the first day of Rep. Joe Armstrong’s trial on Tuesday.

But Armstrong’s attorney argued that the Knoxville Democrat did nothing illegal, and that he was the victim of a fraudulent accountant who became the government’s star witness in the case following a guilty plea.

The prosecution alleges that Armstrong bought the cigarette tax stamps before a state law tripling the levy — which the lawmaker advocated and voted for — went into effect, and later re-sold them for a big profit. That “bonanza” was not reported to the IRS and allowed Armstrong to fund an opulent lifestyle that included the purchase of a Mercedes, said Assistant U.S. Attorney Frank Dale.

“Show Mr. Armstrong that he’s not above the law,” Dale urged the jury. Continue reading

All-white jury seated in Armstrong trial; sole black prospect excluded

The only black candidate in the jury pool for the trial of veteran black lawmaker state Rep. Joe Armstrong was tossed out Tuesday afternoon at the behest of prosecutors — but not without a fight.

Further from the News Sentinel:

The rejected juror was a 60-year-old native Knoxville woman who is retired after serving most of her life as a home health caregiver. Her education was limited. She did not attend high school but has a GED.

Assistant U.S. Attorney Charles Atchley Jr., initially sought to boot her off the panel because he said she appeared “disengaged” in the jury selection process.

“She just gave me the impression she did not want to be here,” Atchley said. “She gave me the impression she was just disinterested in the issues.”

He also cited her lack of formal education.

“This is a complicated case,” Atchley told Senior U.S. District Judge Thomas Phillips.

Under a U.S. Supreme Court ruling, the defense may challenge a prosecutor’s motive in eliminating a black juror even though each side is allowed to kick out a certain number of people without giving a reason. Defense attorney Gregory P. Isaacs balked at Atchley’s bid to remove the only black person in a pool of more than 60 people.

“What we have here is a completely subjective basis … saying, basically, ‘I didn’t like the way she looked,’ ” Isaacs said.

…But the judge ruled Atchley’s concern over the woman’s educational level was a valid reason for his move to exclude her from the panel. The U.S. Supreme Court didn’t say blacks cannot be excluded as jurors — only that they cannot be excluded simply because of their race.

“It appears to the court she may well have difficulty following the evidence in this case,” the judge said.

A jury of 14 people, which includes two alternates, has now been seated. All are white and most are older. Eight are women.

Special ouster session way short on signatures

The idea of calling a special session of the Legislature to consider ouster of state Rep. Jeremy Durham — and possibly Rep. Joe Armstrong — appears to be losing steam.

As of Friday, only four nine of the necessary 66 state House members had signed either of two submitted petitions. One by House Majority Leader Gerald McCormick of Chattanooga, calls for expelling Durham, R-Franklin, and the other by House Republican Caucus Chairman Glen Casada, calls for ousting both Durham and Armstrong, D-Knoxville.

Durham has been accused in an investigative report by state Attorney General Herbert Slatery of sexually harassing 22 women legislative staffers, lobbyists and interns. Armstrong goes on trial Tuesday on federal tax evasion charges that prosecutors contend involve profits from a cigarette tax increase he supported as a lawmaker.

Casada said in a telephone interview Sunday that he was a bit surprised at the scant signatures so far and will confer “mid-week” with House Speaker Beth Harwell to consider the possibility of extending the deadline for signing the petitions that is currently set for Friday.

But he also said that, should the signature drive fall short, he would accept that decision as “what the majority wants.” Continue reading

Armstrong trial outcome could hinge on jury instructions

The basic facts are not in dispute as state Rep. Joe Armstrong’s trial begins Tuesday in U.S. District Court at Knoxville, reports Jamie Satterfield, and the outcome could hinge on what the judge decides to do with preliminary motions involving jury instructions.

Armstrong has never denied in any court record that he voted for a cigarette tax stamp hike and set out to prosper from it by getting a wholesaler to buy him some at the current price and then sell them when the increase takes effect. It is not illegal. He’s not charged with any crime for making a profit off his vote.

The real fight is over whether he agreed with his accountant to hide that profit from the IRS and then signed a tax return knowing it was a lie. It is those crimes — conspiracy to defraud the federal government and tax evasion — of which Armstrong is accused, nothing more.

…The key, then, is whether Armstrong was a “willing” partner. If (Assistant U.S. Attorney Charles) Atchley’s proposed jury instructions are allowed after a hearing Monday before Senior Judge Thomas Phillips, jurors will be told Armstrong can still be guilty if he “deliberately closed his eyes to what would otherwise have been obvious to him.”

The message the government wants to send jurors is everyone knows you have to pay taxes on a profit.

“No one can avoid responsibility for a crime by deliberately ignoring what is obvious,” the proposed instructions state.

(Defense attorney Gregory) Isaacs, on the other hand, is pushing for legal instructions more sympathetic to his client’s defense that he relied on accountant Stivers to act lawfully and remained ignorant of any illegality even when he should have known better.

“The defendant’s conduct was not willful if he acted through negligence — even gross negligence — mistake, or accident, or due to a good-faith belief or misunderstanding as to the law,” Isaacs’ proposed instructions stated. “Unlike many criminal offenses, ignorance or a good faith misunderstanding of the law constitutes a defense to a criminal tax offense.”

The message the defense wants to send jurors is not all of us can be doctors, lawyers or accountants, so we rely on those folks to know what’s right and we trust them to do it.

Casada pushes Armstrong ouster petition

As House leaders collect signatures required to call a special legislative session to expel Rep. Jeremy Durham, the former mentor to the embattled Franklin Republican continues to push for the ouster of a Democrat, reports The Tennessean.

House Republican Caucus Chairman Glen Casada, R-Franklin, is now circulating his own petition for a special session that includes the names of both Durham and Rep. Joe Armstrong. Armstrong, D-Knoxville, is under federal indictment on fraud and tax evasion charges.

“Just as Rep. Durham lied to me and betrayed the trust of this Caucus with his actions, it is plain to see that Rep. Armstrong has also betrayed our trust as a legislative body and used his public office for personal gain,” Casada said in an email Monday to all members of the House GOP caucus.

The move comes after House Speaker Beth Harwell released a petition Friday that only names Durham in its call for a special session. Harwell spokeswoman Kara Owen acknowledged Casada’s desires for Armstrong to be included on the petition Friday, but didn’t immediately say Monday how Casada’s petition may affect the one being circulated by the speaker.

…The current sexual harassment accusations against Durham come from the attorney general’s investigation, which only became public this month, whereas the extent of the allegations against Armstrong have been public since late 2015, Rep. Cameron Sexton, R-Crossville said. He questioned why the legislature didn’t pursue ousting Armstrong while it was in session earlier this year, when all the information available now was also available then.

“There’s the concern about really why at this point is Joe being added? If it’s simply politics, then that’s not a reasonable basis to do it now when we should have done it in March,” Sexton said.

Casada agrees the legislature should have moved to boot Armstrong during session.

“We should have done that back then, but we didn’t,” Casada said in a phone interview. “So now we’re cleaning up the mistake. There’s no reason, we just didn’t.”

Casada said he expects members will sign both petitions. He said a special session that included discussion of expelling both members would be truly bipartisan, although he didn’t specify why such a session had to be bipartisan.

“What we’ve got here is two men who have visibly, openly violated public trust. It’s indisputable. They both need to go.” Casada said, calling on Democrats to sign his petition.

Last week (House Democratic Caucus Chairman Mike) Stewart, D-Nashville, said any attempt to include Armstrong before the outcome of his trial would be an effort by Republicans to shirk their duty in dealing with Durham.