Rep. Joe Armstrong pleads not guilty to fraud, tax evasion

NASHVILLE, Tenn. (AP) – State Rep. Joe Armstrong of Knoxville has pleaded not guilty to federal fraud and tax evasion charges connected to an increase in the state’s cigarette tax.

The Knoxville Democrat was restrained by handcuffs and leg shackles when he appeared before U.S. Magistrate C. Clifford Shirley Jr. on Friday.

Trial was set for Aug. 25, but the date will likely change.

The indictment filed Tuesday 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 borrowed $250,000 to buy tax stamps at the old 20-cent rate, and then sold them at a profit after lawmakers approved a 42-cent increase.

The lawsuit says Armstrong failed to report more than $318,000 in income.