Tag Archives: courts

TN man sentenced in Mitt Romeny tax return case

A Tennessee man has been sentenced to four years in prison for claiming he had hacked Mitt Romeny’s tax returns and demanding money to keep them secret, reports NBC News.

Michael Mancil Brown, 37, of Franklin was convicted in May on fraud charges. He sent a letter in 2012 to the accounting firm of PricewaterhouseCoopers claiming that he had gotten access to its computer network and had stolen three years’ worth of tax documents for Romney and also for Romney’s wife, Ann.

Brown demanded that the firm deposit $1 million worth of bitcoins into an account to prevent him from releasing the tax documents he claimed to have.

Late Monday, U.S. District Court Judge Billy Roy Wilson sentenced Brown to 48 months in prison and ordered him to pay about $200,000 in restitution to the accounting firm.

Note: Justice Department press release is HERE.

Court overturns FCC Chattanooga broadband order

MEMPHIS, Tenn. (AP) — A federal appeals court on Wednesday overturned a Federal Communications Commission ruling allowing city-owned broadband services to expand into areas overlooked by commercial providers.

The decision comes as part of a dispute between the FCC and two states, Tennessee and North Carolina, about expanding superfast internet service in their respective cities of Chattanooga and Wilson to surrounding areas.

Both states had passed laws preventing such expansion. The FCC last year voted 3-2 to override those laws. The states then asked the 6th Circuit Court of Appeals to review the FCC’s ruling.

The appeals court said that the FCC’s order pre-empted the state laws and “the allocation of power between a state and its subdivisions.” The court said the FCC’s action requires a “clear statement” of authority in federal law, but the law does not contain a clear statement authorizing pre-emption of Tennessee’s and North Carolina’s laws. 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 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.

Ohio judge won’t dismiss claims against Haslam company proceed

COLUMBUS, Ohio (AP) — An Ohio judge won’t dismiss breach-of-contract and other claims against the truck-stop chain owned by Cleveland Browns owner Jimmy Haslam and his brother, Tennessee Gov. Bill Haslam.

Several companies have sued Pilot Flying J in connection with a scheme to cheat customers out of promised discounts and rebates.

A Franklin County judge this week refused the chain’s request to dismiss claims in an Ohio suit. He concluded the companies making the allegations provided sufficient information to pursue the claims.

Jimmy Haslam isn’t charged and has denied knowing about the scheme, which came to light after federal agents raided the company’s Knoxville, Tennessee, headquarters in 2013. It led to millions of dollars in settlements and charges against some employees.

Bill Haslam has said he isn’t involved with operating the company.

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.

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.

Armstrong fights effort to call his wife as witness

State Rep. Joe Armstrong, facing trial Aug. 2 on federal tax evasion charges, is opposing prosecuting attorney Charles Atchley’s move to call his wife, Letonia Armstrong, as a witness against him, reports the News Sentinel.

“Joseph Armstrong intends to invoke the marital communications privilege at the trial of this matter,” defense attorney Gregory P. Isaacs wrote.

Unlike his longtime accountant and his business partner in the cigarette tax stamp deal at the heart of the tax evasion case — both of whom secretly recorded Armstrong and are key witnesses against him — Armstrong’s wife will not willingly lend the government a hand, Isaacs wrote.

“Additionally, upon information and belief, LeTonia Armstrong will be asserting both the adverse testimonial and the confidential communications privileges with respect to testimony related to Joseph Armstrong at trial,” the motion stated.

There is no law barring a spouse from testifying, but courts have long recognized two rights, known as “privileges,” involving spousal testimony. The first is known as the marital communications privilege, designed to protect marital confidences shared between spouses. Under that privilege, anything Joe Armstrong said to his wife in confidence about the tax stamp deal would be off-limits — although the government can challenge whether the communication was, in fact, meant to be confidential.

The second is known as the adverse testimonial privilege. It can be invoked only by the spouse who is being summoned to testify. That privilege holds that forcing a spouse to spill the beans on a partner does irreparable damage to the marriage. If LeTonia Armstrong chose to give adverse testimony against her husband, he could not use that particular privilege to stop her.

Atchley has not yet responded to the motion. For his part in the run-up to trial, Atchley seeks approval to file under seal some sort of document — he doesn’t label it. His only justification for seeking a sealing order is that the document contains “sensitive material.” Senior U.S. District Judge Thomas Phillips has not yet weighed in on the request.