Ex-State Rep. Armstrong sentenced to probation, house arrest fined $140K

Former longtime state Rep. Joe Armstrong was sentenced Wednesday to three years of federal probation for tax fraud and ordered to pay back the money prosecutors say he failed to report to the IRS in 2008.

In addition, Armstrong will spend six months on house arrest and wear an electronic monitoring device. He'll also have perform 300 hours of community service.

In total, the ex-state House member will pay $99,943 to the IRS; another $40,000 in fines; and the cost of prosecution.

After the 90-minute hearing, defense attorney Gregory P. Isaacs said he was “very pleased” for Armstrong and his family, noting that “the courtroom was packed with his friends, supporters, family members that traveled from all over the country, community leaders.”

“I think it was a very fair and just result based on the applicable considerations under federal sentencing,” Isaacs said. “There were two different sides of the courtroom, obviously the United States thought the sentence should be higher because he was an elected official public official, our position was much different. Joe has been a public servant. He’s not a professional politician, he’s someone that helped individuals tirelessly in his community for 28 years. And those are factors the court is required to consider.”

Armstrong, too, weighed in, saying he wanted to “thank the people for their support, prayers and reaching out particularly not only to my family my church family and the community, for their entire support.”

Prosecutors were initially seeking as much as three years in prison for Armstrong.

Last month, however, the U.S. Probation Office – using guidelines to determine his sentence – calculated a much lower penalty range based on the amount of taxes lost to the IRS.

PREVIOUS: State Rep. Joe Armstrong found guilty of filing a false tax form

RELATED: State Rep. Joe Armstrong retires in wake of felony conviction

Prosecutors argued Armstrong cheated the government out of more than $100,000, an amount that carries a stiffer sentence. The court, however, sides with Armstrong, finding that the lost was just under that at $99,943.

That $57 difference meant the ex-state representative was looking at a maximum of 21 months in prison.

A federal jury in August found the East Knoxville Democrat guilty of filing a false and fraudulent tax return, a felony, after prosecutors argued that the ex-legislator failed to report taxes on a $312,000 profit he made from selling cigarette tax stamps in 2008.

A month later, Armstrong officially retired from his 15th District the state House seat that he held for almost three decades.

Because he's a felon, Armstrong can no longer hold public office again.

Armstrong seeks acquittal or new trial in federal tax evasion case

State Rep. Joe Armstrong is asking that a federal judge toss his felony tax evasion conviction or at least grant him a new trial.

A jury earlier this month found the long-time East Knoxville Democrat guilty of filing a false and fraudulent tax return, but declined to convict him on two other charges - conspiracy to defraud the United States, and attempting to evade and defeat taxes.

In court records filed Monday by Armstrong’s defense team, his attorney noted that the jury’s verdict was “inconsistent.”

MORE: Renewed motion for judgment of acquittal or new trial

Lawyer Gregory P. Isaacs said the jury shouldn’t have found him guilty of filing a false tax return if it acquitted him on attempting to evade and defeat taxes.

Isaacs argued that courts in cases where a defendant is charged with both "attempted evasion" and "filing a false return," then prosecutors “must show some distinct facts between the two in order to submit both charges to the jury.”

“In this instant case, the United States did not show any differentiation in the factual basis supporting Court Two and Count Three, rather one narrative of alleged conduct premised upon identical evidence and proof,” Isaac’s motion filed in U.S. District Court states.

Prosecutors, who have said they will seek prison time for Armstrong, have not responded to the motion.

During his week-long trial, the government contended that the 14-term state representative 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 said 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, had pleaded guilty for conspiracy to defraud the United States and prosecutors offered him leniency to testify against Armstrong.

In his motion, Isaacs said the District Court “should give significant weight to the impeachment” of Stivers including “his repeated inconsistencies and false statements.”

“Based upon the credibility of Mr. Stivers, the District Court should totally disregard all of his testimony, leaving insufficient evidence to establish Mr. Armstrong acted willfully,” the motion states.

As a result of his conviction, the Knox County Democratic Party picked Rick Staples to replace Armstrong in the November general election for the 15^th District House seat. He faces independent Pete Drew.

Armstrong’s sentencing is set for Nov. 30.

Ex-Trustee Lowe seeks venue change

Mike Lowe

Knoxville attorney Greg Isaacs - not one to shy from media coverage - will be in Criminal Court on Monday, asking for a change of venue for his client - former long-time Knox County Trustee Mike Lowe.

The reason? "Pervasive and inflammatory" media coverage.

Er, yeah, ha. Sure. (Wonder if this blog entry counts. Heh.)

Rest of the story RIGHT SMACK HERE.

Judge to Ownby: Write apology note

Greg Isaacs, left, Jeff Ownby on right

Man, what a weird hearing.

Knox County Commissioner Jeff Ownby was in court today and pleaded no contest to public indecency.

He could have paid a $500 and called it a day. Instead he asked for judicial diversion, which will wipe the record clean. In theory.

Ownby, whose job status is questionable (he said he was unemployed, then said he works part-time for a real estate company, and he also has a part-time commission job), told the judge that he was looking for work. He said he'd get to the third or fourth interview and be on his way to a job offer but would fail the background check.

Judicial diversion (I suppose he was suggesting) would get him out of all this.

Apparently, he's never heard of Google.

Anyhoo, the judge noted that because he sought diversion, he could then put some provisions in place.

And boy did he. He put Ownby on supervised probation for six months (that ain't free), told him to continue counseling (that ain't free) and told him to stay 100 yards away from Sharp's Ridge (that's free).

The kicker? Told him to write a letter “explicitly detailing” what he had done and to apologize. Then the judge changed his mind and told Ownby to just explain what he did and use general terms. Heh.

He told him that the letter must be entered into the Knox County Commission meeting minutes this month. Wow.

And, he told him to turn it over to the News Sentinel. Geez.

Further, the judge wanted it done by noon. (By the way, this is the letter, right smack here.)

None of this, of course, went over too well with Ownby's attorney, Gregory P. Isaacs.

The lawyer told the judge that he had some other pressing things he had to do. The judge told him to cancel them. Isaacs then wanted to know how he would get the letter to him. Judge said to email it. Isaacs then asked if he would get it. Judge told him: “Uh yeah. On my phone. I got one of those phones that's smarter than me.”

Heh.

(On a side note, Isaacs needs to get a new phone. The guy drives around in a gazillion dollar car a wears some seriously fancy clothes sans socks, and yet he owns a 2-cent phone. But I digress.)

The judge, Blount County's William Brewer, again stressed that he wanted the letter by noon and to the media by 2 p.m. He said for Ownby it's “kind of like ripping the Band-Aid off . . . and he can get on with his life.”

At one point, he also said: I've been on the bench 24 years now and one thing I've found consistent is that human beings are interesting creatures. Why we do what we do is very intriguing . . . and by all accounts from what I've heard today and from what I've read, Mr. Ownby is a good man and a good citizen . . .”

Well, we'll see what happens on May 28.