TBI, FBI look at state handling of some sales tax investigations

NASHVILLE - The Tennessee Bureau of Investigation and FBI are looking into whether former state Revenue Commissioner Reagan Farr mishandled several sales-tax collection investigations, officials confirm.

Among the cases under examination, officials said, is a matter involving the Middle Tennessee furniture store chain D.T. McCall & Sons, owned by the McCall family, a prominent contributor to Republican campaigns and PACs.

TBI spokeswoman Kristin Helm said the agency had received requests "to investigate circumstances relating to state sales tax investigations and subsequent negotiations and settlements on the part of the Department of Revenue on businesses in the state.

"The subject of the investigation ... is Reagan Farr and others," said Helm, who noted the request came on Aug. 6 "and we are working it with the FBI."

Helm confirmed that D.T. McCall & Sons were among the cases being examined but would not elaborate.

The company's president, A.J. McCall of Lebanon, ran unsuccessfully for the state House as a Republican in 2008 and had planned a 2010 bid for state Senate until abruptly dropping out in January.

Filings show McCall family members have contributed at least $176,000 this election cycle to the Tennessee Republican Party, GOP gubernatorial candidates, state Senate and House campaigns, leadership political action committees and the McCall PAC.

Efforts to reach McCall on Monday and Tuesday were unsuccessful.

Earlier this year, reports swirled through political circles that D.T. McCall & Sons was being investigated on state sales tax matters, but Farr refused to confirm such a probe, citing state confidentiality laws.

Farr, an attorney, stepped down from Democratic Gov. Phil Bredesen's Cabinet on Aug. 27, saying he intended to return to the private sector.

Efforts to contact Farr were unsuccessful Monday and Tuesday. One of the prosecutors involved in the matter emphasized that Farr's honesty is not under question but rather the handling of sales tax collection cases.

District Attorney General Tommy Thompson of the 15th Judicial District, which includes Jackson, Macon, Smith, Trousdale and Wilson counties, was among the prosecutors who called the TBI about the sales tax investigation.

He said he called TBI after becoming concerned the Revenue Department, under Farr's direction, had "poorly handled" an investigation into whether the McCall stores were collecting sales taxes.

"The best I can say is they've been under serious investigation for failing to pay sales taxes and dealing in cash," Thompson said.

He said his knowledge about the Revenue Department case came through a former D.T. McCall employee that he was working with on a "collateral matter."

The D.T. McCall employee told him that, when Revenue Department officials wanted to question several McCall employees in the sales-tax investigation, "they were provided a lawyer and every one of them took the Fifth Amendment and refused to incriminate themselves," Thompson said.

"That's my biggest problem with the whole thing. That's just a red flag to any prosecutor."

An experienced prosecutor could have helped Revenue officials navigate such roadblocks, he said, but no prosecutor was contacted by Farr or other Revenue investigators.

"TBI works with those who are going to try it," Thompson said, "but Commissioner Farr didn't in this situation, and there were matters where I think he should have consulted with whomever was going to prosecute the case.

"I don't think [Farr] is a crook," Thompson said. "He just didn't need to be investigating anything like that."

Former Tennessee Attorney General Paul Summers, who acknowledged representing D.T. McCall & Sons on "many, many things," said he could not delve into specifics. However, he said the McCalls are "law-abiding citizens and they pay their taxes."

Asked about the TBI investigation, Farr's successor at the Revenue Department, Charles A. Trost, said via e-mail that "the department is not a party to or privy to any outside investigation at this time."

Records of individuals or companies involved in civil settlements are not open to the public, he said.

Speaking in general terms about how investigations are handled, Trost said "once a Revenue employee (generally a tax auditor) finds indications of fraud they are required to forward the information to our Special Investigations unit. Special Investigations then determines if there has been any criminal violation of the Revenue laws."

In January, A.J. McCall dropped plans to run in the Senate District 17 contest, citing the economy and noting, "I feel that my presence at D.T. McCall & Sons is more important than ever."

He threw his support in the GOP primary to Sen. Mae Beavers, R-Mt. Juliet, who initially said she would not seek the seat but later reversed course. She defeated Rep. Susan Lynn, R-Lebanon, in the primary.

State Bureau of Ethics and Campaign Finance filings show the McCalls, through their own McCall PAC, contributed $15,000 to Beavers and family members gave another $5,500 through Sept. 30. Beavers beat Lynn in August and now faces Democrat George McDonald on Oct. 2.

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