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Justice News

Department of Justice
U.S. Attorney’s Office
Middle District of Tennessee

FOR IMMEDIATE RELEASE
Friday, May 27, 2016

Rutherford County Tennessee Sheriff Indicted By Federal Grand Jury

Chief Administrative Deputy and Sheriff's Uncle Also Indicted

Robert F. Arnold, 40, Sheriff of Rutherford County, was indicted yesterday by a federal grand jury along with Chief Administrative Deputy Joe L. Russell II, 49, and Arnold’s uncle, John Vanderveer, 58, of Marietta, Georgia, for their role in the formation, marketing and operation of JailCigs, LLC and the concealment and misrepresentation of Arnold and Russell’s involvement with the business, announced Jack Smith, Acting U.S. Attorney for the administration of this case and Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.

Joining Smith in announcing the charges at a mid-morning press conference were Matt Foster, Acting Assistant Special Agent in Charge of the Memphis Division of the FBI and Mark Gwyn, Director of the Tennessee Bureau of Investigation. 

The 14-count indictment charges Arnold, Russell and Vanderveer with honest services fraud; mail fraud; wire fraud; bribery concerning federal programs; extortion under color of official right; obstruction of justice; and conspiracy. 

“The overwhelming majority of law enforcement officers in the Middle District of Tennessee and across this nation have a deep and abiding sense of duty to the people they serve,” said Acting U.S. Attorney Jack Smith.  “We never want to allow the illegal and self-serving actions of a few to unfairly brand the unsung heroes who every day place the safety and security of their communities above their own needs.  Today we thank those officers for their dedication and service and for this reason we will always pursue justice for those whose actions attempt to discredit the profession.” 

The indictment alleges that the conspiracy and other violations were carried out as follows: In October 2013 Arnold, Russell and Vanderveer each invested $3,000 to start JailCigs, LLC, a private company whose primary business involved selling electronic cigarettes to be used by inmates at jails and other detention facilities.  They agreed on a business model which would allow friends and family of inmates to purchase e-cigarettes on-line and have them shipped to the jail for distribution by jail personnel.  As part of the marketing strategy of JailCigs, every jail or detention facility in Tennessee that agreed to do business with the company was promised a commission of $5 for every e-cigarette sold.  Shortly after the company was formed, Arnold and Russell introduced JailCigs into the Rutherford County Jail.  Rutherford County was the company’s first and largest customer in Tennessee.   Rutherford County was also the only jail in Tennessee that was not promised and did not receive the $5 commission for every e-cigarette sold.

Arnold and Russell used their official positions to make JailCigs profitable, including by allowing the company’s e-cigarettes to be admitted into the Rutherford County Jail as non-contraband; directing jail employees to perform various tasks beneficial to JailCigs while working on county time; promoting JailCigs to other sheriff offices and counties; and permitting the company not to pay Rutherford County the customary commission from the sale of JailCigs that was made to other counties.  Arnold and Russell also failed to subject the business arrangement with JailCigs to a competitive bidding process and did not enter into a written contract with the company, despite being advised to do both things by the county attorney.

During the period from October 2013 to April 2015, JailCigs sold approximately 10,500 e-cigarettes that were delivered to inmates at the Rutherford County Jail.  Each e-cigarette sold for $14.95, including shipping and handling, and these sales resulted in approximately $156,975 in revenue to JailCigs. 

Beginning in December 2013 each defendant began receiving significant payments from JailCigs, LLC.  Between December 2013 and April 2015 Robert Arnold received a total of $66,790; Joe Russell received a total of $52,234.41; and John Vanderveer received $49,545.50.  The total payments made to the defendants during this period were $168,569.91.

The indictment specifically alleges that during the period of June and July of 2014, while Arnold was running for re-election as Sheriff of Rutherford County, he received approximately four checks from JailCigs, totaling $22,634.00.  Three of these checks were deposited to the bank account of “Arnold for Rutherford County Sheriff.”

On the eve of the 2014 election, Joe Russell sent an email to a JailCigs customer in which he reminded the customer that Sheriff Arnold was the person who brought the JailCigs program to the Rutherford County Jail for the enjoyment of inmates and if Arnold was not re-elected the program would come to an end.  The email implored the customer to “tell everyone you know to support Sheriff Arnold in his re-election.”

At various times, several people raised questions and concerns about the propriety of the arrangement between JailCigs and Rutherford County.  When questioned, Arnold and Russell repeatedly made misrepresentations that the arrangement had been approved by various officials, including the county attorney and the county auditor and repeatedly denied that they were personally involved with JailCigs or were receiving any benefit from the sale of its product.  In an effort to protect JailCigs on-going business, Arnold subsequently made several false and misleading statements to the media about his role in and knowledge of JailCigs, including saying that he was unaware of Russell’s involvement with JailCigs and that he was “shocked” and “taken back” by the discovery.  Arnold also told the media that he had not received any income from JailCigs and had made a mistake when he listed JailCigs as a source of income on the “Statement of Disclosure of Interests” form filed with the Tennessee Ethics Commission. The day before making this statement, Arnold had deposited a $3,900 check from JailCigs.

The indictment also alleges that on April 17, 2015, after learning of the media reports and pending criminal investigation, John Vanderveer met with the Tennessee sales representative for JailCigs and told her that “Joe” wanted her to destroy her commission tabulation sheets so that there would not be a record of commission payments from Rutherford County going to “Robert or any of us.”

“The public deserves integrity from its elected officials, and it’s disappointing when law enforcement leaders abuse their position and contribute to public distrust,” said TBI Director Mark Gwyn.  “I am grateful for the cooperation with our federal partners in pursuing the facts in this case.”

“We all rely on those who hold positions of public trust to execute their duties with integrity and in the best interests of the public,” said Gerard J. Cocuzzo, Acting Special Agent in Charge of the Memphis Division of the Federal Bureau of Investigation. “The FBI and our law enforcement partners will continue to investigate those who abuse that trust out of personal greed, and bring to justice those who would seek to line their own pockets by ignoring their sworn oath to uphold the law.”

Charges in this case carry maximum penalties of between 5-20 years in prison and a $250,000 fine.  An indictment is merely an accusation and all defendants are presumed innocent unless and until proven guilty in a court of law.

This case was investigated by the Tennessee Bureau of Investigation and the FBI.  Assistant U.S. Attorney Cecil W. VanDevender of the Middle District of Tennessee and Trial Attorney Mark Cipolletti of the Department of Justice’s Public Integrity Section are prosecuting the case.

Topic(s): 
Public Corruption
Updated May 27, 2016