(WBIR - KNOXVILLE) - Sam Anderson, a community activist and the county's longest serving Knox County Board of Education member, has resigned his part-time position from the Knox County Schools system because of his role as an unindicted co-conspirator to state Rep. Joe Armstrong, who was indicted last week in an alleged tobacco tax fraud scheme.
Bo Reed, Anderson's attorney, confirmed Anderson received a subpoena from the grand jury, and testified. Reed said he couldn't answer whether or not Anderson was offered immunity from prosecution for his testimony.
"While he believes he has not been involved in any wrongdoings, with revelations of some links to the Joe Armstrong case, he did not want to be a distraction to the work of the school system," KCS Superintendent Jim McIntyre said in an email to board members Tuesday.
More: Armstrong a prominent political, community force for decades
Anderson was a part-time senior adviser for "high needs schools," according to McIntyre's email. He earned roughly $45,000 annually.
A federal grand jury indicted Armstrong last Wednesday on charges of conspiracy to defraud the U.S., attempted tax evasion and lying to the IRS. He has pleaded not guilty.
The charges against Armstrong stem from a scheme to purchase a massive quantity of cigarette tax stamps in 2007 when they were $.20 a piece, then sell them for a profit in 2008 after the legislature approved a hike that more than tripled the stamps' cost to $.62 each.
Buying stamps at a low price and selling them for a high price is not in itself illegal. But, prosecutors say Armstrong, 58, and other unnamed "co-conspirators" purchased more than allowed under law.
Furthermore, the indictment accuses Armstrong of trying to hide the business dealings by using a company in Kentucky and then failing to report more than $400,000 of income on his tax returns.
Anderson, 62, and Armstrong are both leaders and high-profile presences in the black community.
Armstrong's political career goes back to the early 1980s as a member of the Knox County Commission and then grew to the state level in 1988 with his election to represent the East Knoxville district in the house. He has been elected a total of 14 times to the seat.
Armstrong also served as president of the National Black Caucus of State Legislators from 2012 through 2014. The longtime state Representative has stood on the national political stage to opine about topics as diverse as race and public health.
Armstrong is one of the General Assembly's longest serving Democrats. Until Republican lawmakers took over the House, he led one of the Legislature's most influential committees, the House Health and Human Resources Committee.
Anderson spent 34 years with the city, beginning his career in the school system – at the time run by the city – in 1976.
Anderson, also the longest serving member of the Knox County School Board, served as its chairman for five years. He opted not to seek re-election in 2010 after more than 20 years on the board.
Prosecutors say accountant Charles M. Stivers of Kentucky aided in the plot, helping to hide $1.2 million in assets from the sale in a Kentucky investment firm identified as Bowling Branch Investments Inc. Stivers got a 15 percent cut of the sales to put their "profits" in the BBI account.
Armstrong netted roughly $500,000, and records show the rest went to an unidentified co-conspirator "whose identity is known to the Grand Jury, was a friend and business associate of the defendant, Joseph E. Armstrong."
Armstrong had an agreement to buy the cigarette tax stamps from a firm identified as Tru Wholesale LLC at the lower stamp rate, according to the indictment. He then held onto the stamps in anticipation that the rate would be increased, thereby creating a built-in profit for him and the conspirators, according to the indictment.
A federal information was presented against Stivers in April, detailing allegations against him. The document did not identify Armstrong other than to refer to him as "Elected Official". Stivers did not include the money on Armstrong's income tax return.
The indictment suggests that Armstrong owes the IRS more than $100,000 income taxes that were hidden through the scheme.
Stivers, who faces a November sentencing, signed a plea agreement last summer to plead guilty to conspiracy to defraud the U.S., an offense punishable up to five years in prison and a fine of up to $250,000.
