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Testimony: Tobacco dealer paid $30K to meet Armstrong

Robert Carter, who set up the initial meeting between state Rep. Joe Armstrong and a tobacco wholesaler, testified Wednesday in the legislator’s trial on charges of conspiracy and tax evation in the deal developed after the meeting.

Carter testified Wednesday that he brokered a meeting between the veteran lawmaker and Knoxville-based tobacco wholesaler Boyd Wyatt that would ultimately lead to a deal that netted Armstrong roughly $321,000 in profit from a 2007 cigarette stamp tax hike Armstrong voted to approve.

Armstrong is standing trial this week in U.S. District Court on charges of conspiring with his accountant, Charles Stivers, to hide that profit from the IRS — and the voting public — as well as charges of tax evasion and filing a false income tax return.

Until this week, Carter’s role had not been revealed. Also kept under wraps until this week’s trial is the fact that Wyatt’s firm, Tru Wholesale, paid Carter $30,000 to set up a meeting with Armstrong.

Carter testified it wasn’t the first time he charged a “fee” for introducing people to Armstrong. The lawmaker, however, was unaware of Carter’s profiteering off his friendship with Armstrong, he said.

“Sure, he would have been mad,” Carter said of the lawmaker’s reaction if he had discovered Carter’s profiteering.

…Carter had been on the board of Tengasco Inc., an oil and natural gas company, for which Armstrong had worked since 1997, served as director in 1998 and was tapped as chairman of the board in 2003, according to an archived news release from the Knoxville-based energy firm. Stivers also had been on the Tengasco board at some point.

It’s how he and Armstrong met and why, according to defense attorney Gregory P. Isaacs, Armstrong trusted Stivers to do his taxes as far back as 1998.

Wyatt and his firm had a problem. As the exclusive wholesaler for a popular discount cigarette brand, Tru Wholesale stood to gain hundreds of thousands of dollars by hoarding tax stamps at the 20-cent rate on the books in early 2007 and then selling them to retailers at the 62-cent rate that went into effect later that year. But the state Department of Revenue, which sells the stamps, had its own problem — wholesalers were beating down the agency’s doors to buy the stamps at the cheaper rate.

So, the agency decided to ration the stamps. That meant Wyatt and his firm couldn’t buy as many as they wanted. Wyatt’s brother publicly complained to the News Sentinel in 2007 about the ration. It didn’t help.

Armstrong, according to Wyatt’s testimony Wednesday, did.

After Carter put Armstrong and Wyatt together, Armstrong arranged a meeting for Tru Wholesale with Department of Revenue officials, Wyatt testified. As a result, the wholesaler was able to buy its full allotment of the stamps and ultimately made $3 million from the tax hike, he said.

Carter dealt a blow Wednesday to Armstrong’s defense, laid out Tuesday by attorney Gregory P. Isaacs, that he believed Stivers paid the taxes Armstrong owed the IRS on his profit but that Stivers instead stole the money and falsely incriminated Armstrong to avoid punishment for his own thievery.

Carter told jurors Armstrong asked to funnel his profit from the tax stamp deal through Carter’s firm, Carter’s Warehouse, in early 2007 — before prosecutors Frank Dale and Charles Atchley Jr. allege Armstrong recruited Stivers to help him hide the money.

“I said no, he could not,” Carter testified. “I wouldn’t do that. If he used my Corp., it would be under my (federal identification number), and I won’t put it in jeopardy.”

Carter’s testimony, if believed by the jury, bolsters the prosecutors’ case Armstrong “willfully” conspired to hide his windfall from the IRS.

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