State Rep. Joe Armstrong pleads not guilty to tax fraud | UPDATE

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KNOXVILLE, Tenn. (WVLT) -- State Rep. Joe Armstrong of Knoxville pleaded not guilty to tax fraud charges in Federal Court Friday morning.

He entered the courtroom in handcuffs and shackles, then pleaded not guilty to one count of Conspiracy to Defraud the United States, one count of Attempt to Evade and Defeat Tax, and one count of Fraud and False Statements.

His trial is set for August.

The indictment against Armstrong says he used his position as a legislator to profit from the sale of Tennessee cigarette tax stamps and avoid the payment of federal income taxes.


State Rep. Joe Armstrong, a Knoxville Democrat, has been indicted by a federal grand jury for allegedly being involved in a tax fraud scheme.

According to the indictment, the scheme began in 2006 before there was any public mention of boosting the state cigarette tax. It alleges Armstrong and others devised a plan to buy cigarette tax stamps at the then price of 20-cents, knowing it would soon increase to 60-cents and wholesalers would have to buy new tax stamps.

The document alleges Rep. Armstrong, who was a member of the Finance Ways and Means Committee, had insider knowledge that the increase would pass.

Armstrong is also accused of claiming less than he made on his 2008 tax returns. According to the indictment, his return showed taxable income of $152,999 when he knew his taxable income was $471,418.

Armstrong's accountant, Charles Stivers, who is named as a co-conspirator in the indictment has pleaded guilty to one count of Conspiracy to Defraud the U.S. He faces up to 5 years in prison. Sentencing has been set for November.

Representative Armstrong released the following statement:

"This investigation has been ongoing for a number of years. I have a strong belief and respect for our system of justice. I look forward to addressing these allegations and the truth coming out in the very near future. "

His attorney, Greg Isaacs, released this statement:

"Our firm has been retained to Represent State Representative Joe Armstrong regarding the allegations contained in the federal indictment and has been conducting a parallel investigation for the past few months. Representative Armstrong has proudly served his constituents for the 15th District before the Tennessee General Assembly in Nashville for the past 28 years; where he has emerged as a leader in Tennessee State Government. Representative Armstrong intends to enter a plea of not guilty to each and every count of the indictment. Joe is an innocent tax payer who relied upon a tax professional as it relates to the filing of his tax returns."