NASHVILLE - Democratic state Rep. Joe Armstrong of Knoxville has been indicted on federal fraud and tax evasion charges connected to an increase in the state's cigarette tax in 2007.
The indictment filed Tuesday in U.S. District Court alleges that Armstrong devised a scheme beginning in 2006 to profit from the cigarette tax hike planned by then-Gov. Phil Bredesen.
According to the charges, Armstrong bought tax stamps at the old 20-cent rate, and then sold them at a profit after lawmakers voted to increase the tax to 62 cents per pack. The lawsuit says Armstrong failed to report more than $318,000 in income from the scheme in 2008.
Armstrong's attorney, Gregory P. Isaacs, said in a statement that the 26-year lawmaker plans to plead not guilty to the charges.
"Joe is an innocent tax payer who relied upon a tax professional as it relates to the filing of his tax returns," Isaacs said in the statement.
FILE - In this April 14, 2015, file photo, state Rep. Joe Armstrong, D-Knoxville, attends a House floor session at the state Capitol in Nashville, Tenn. Armstrong was indicted on Tuesday, June 16, 2015, on federal fraud and tax evasion charges. Armstrong's attorney said the lawmaker plans to plead not guilty. (AP Photo/Erik Schelzig, file) Armstrong said in the lawyer's statement that the federal investigation has been going on for years.
"I have a strong belief and respect for our system of justice," he said. "I look forward to addressing these allegations and the truth coming out in the very near future."
Armstrong was by Bredesen's side when he toured East Tennessee in 2007 to promote the 40-cent cigarette tax increase to help fund an increase in education funding. Armstrong said at the time the tax should have been raised even further.
"Instead of 40 cents, it should have been a dollar," he said at an event in Oak Ridge in April 2007.
Bredesen on Wednesday declined to comment on Armstrong's indictment.
State revenue officials blamed widespread stockpiling of the old tax stamps for collections falling more than 50 percent below projections in the months after the cigarette tax went into effect. Then-Revenue Commissioner Reagan Farr said the state sold $9 million more tax stamps in the months before the hike than in the same period the year before.
"We had a lot of people on the last day of June trying to buy multiple rolls of stamps," Farr said at the time. "Interestingly, when we said we'd provide them on July 1, they didn't want to buy any at all."
Republican House Speaker Beth Harwell of Nashville said in an email that while she hasn't seen the Armstrongindictment, she "would in no way defend any unlawful activity by a member, and take it very seriously."
"Members of the Legislature should never act to seek personal gain from their service to the state," Harwell said.
House Democratic Leader Craig Fitzhugh of Ripley said he's served with Armstrong for more than 20 years, and "I have never known him to be anything other than a dedicated public servant and an advocate for his community."
"We have a justice system in place to deal with these situations," Fitzhugh said. "I believe it is important to reserve our judgment until all the facts have come to light."
Armstrong became Knox County's youngest commissioner in 1982, and would later be elected to represent House District 15 in 1988. He is tied with Speaker Harwell and Rep. Steve McDaniel, R-Parkers Crossroads, as the longest-serving members in the House.
He's known for strongly advocating for minority viewpoints, yet willing to work with Republicans on business-related matters.
Armstrong is a former chair of the Tennessee Legislative Black Caucus. His two-year term as president of the National Black Caucus of State Legislators ended in January. The state House Democratic Caucus this year electedArmstrong the new position of leader pro tem.