KNOXVILLE - Four days after winning the Democratic Primary, a federal jury found long-time state Rep. Joe Armstrong guilty of filing a false and fraudulent tax return.
The jury, however, declined to convict the veteran lawmaker on two other charges: conspiracy to defraud the United States, and attempting to evade and defeat taxes.
Those two offenses carried stiffer penalties - each as much as five years behind bars. Filing a fraudulent tax return, which is a felony, carries up to three years in prison and a fine of up to $250,000.
"We certainly think there was enough evidence to convict him of count one and count two but we’re very pleased with a conviction on count three," said Assistant U.S. District Attorney Chuck Atchley. "It’s a felony. He’s now a convicted felon."
Atchley said he will seek prison time for the lawmaker.
In addition, the prosecutor said, Armstrong "still owes the taxes and he’s still going to be accountable for the tax laws."
Senior U.S. District Judge Thomas Phillips sent a Nov. 30 sentencing hearing.
Armstrong and his attorney, Gregory P. Isaacs, left immediately after the verdict was announced.
In a released statement, Isaacs said: “State Rep. Joe Armstrong wants to thank all of his family, friends and constituents for their prayers and support throughout this process. Representative Armstrong is evaluating all of his available options at this time.”
Armstrong faces an independent challenger in the November election, but that's not going to happen, according to state officials.
Secretary of State spokesman Adam Ghassemi said the felony conviction automatically disqualifies Armstrong from seeking re-election. He said the Democratic Party now has until Sept. 29 to nominate another candidate for the Nov. 8 general election.
Tennessee Democratic Party Chair Mary Mancini said the party is already looking into a replacement.
“As we have said from the start, this is a legal matter that is best left to our justice system," Mancini said ina released statement. "The justice system has now ruled and we will take whatever appropriate action necessary to remove Rep. Armstrong from office and replace him on the ballot in November.”
Armstrong spent most of last week in U.S. District Court on trial.
The government contended that the 28-year East Knoxville Democrat used his position to buy state cigarette tax stamps before an increase was passed by the state Legislature. He then sold them for a profit – about $321,000 – but failed to report tens of thousands of dollars of the income on his 2008 tax returns, prosecutors said.
The government argued that Armstrong worked in conjunction with his Kentucky-based accountant to hide the money from the IRS by funneling it through one of his accountant’s businesses.
The accountant, Charles Stivers, has already pleaded guilty for conspiracy to defraud the United States and prosecutors offered him leniency to testify against Armstrong.Stivers, has already pleaded guilty for conspiracy to defraud the United States and prosecutors offered him leniency to testify against Armstrong.
In the end, the case appeared to come down to who was more believable: Stivers or Armstrong.
It looks like the jury favored Stivers, at least in part.
During testimony, Armstrong said he rant the money through Stivers' company due to Stivers' recommendation.
Armstrong said he “trusted” and “never had any reason to doubt” Stivers.
Further, defense attorney Isaacs told jurors, Stivers’ testimony couldn’t be trusted.
He noted that Stivers already pleaded guilty to conspiracy to defraud the IRS and during the time that agents were investigating him and Armstrong, the accountant changed his story as many as six times.
“I still couldn’t believe it,” Armstrong said Friday in court recalling when he found out the taxes hadn’t been paid. “Truly this had to be a mistake.”
The jury of eight women and four men deliberated for a combined five hours on Friday and Monday.
Armstrong won last Thursday night's uncontested Democratic Primary election for the 15th District in the Tennessee House of Representatives, receiving 1,122 votes.
In a released statement, the executive director of the state GOP, Brent Leatherwood, said: “Voters want to have confidence in their elected officials and the actions of Armstrong . . . who give their unflinching support to him have shaken that sacred trust.”
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