Stacey Barchenger, Mary Reeves, Scott Broden, Natalie Alund

USA Today Network

Rutherford County Sheriff Robert Arnold has been indicted on 13 federal charges accusing him of misusing his authority and operating a scheme in which he pocketed more than $66,000.

Arnold’s involvement with e-cigarette company JailCigs has been under scrutiny for more than a year by state officials. On Friday, he, Rutherford County Sheriff's Office Chief Deputy of Administration and Finance Joe Russell and John Vanderveer, Arnold’s uncle, walked into a federal courtroom in Nashville to hear the charges against them.

Each wore handcuffs.

An indictment accuses each man of 13 charges, including conspiracy, fraud, bribery and misusing their authority. It says they started the company in Georgia, brought it to Rutherford County without revealing their role in it and pocketed the profits from e-cigarette sales.

"Cases like this involving public officials take a great deal of care, time and effort to investigate," acting U.S. Attorney for the Middle District of Tennessee Jack Smith said in an earlier press conference. "We want to make sure we investigate them fully before we ask a grand jury to consider voting an indictment in a case."

U.S. District Magistrate Judge John Bryant read the charges and released the men on a promise to appear in court. If they violate the terms of their release, they will have to pay $250,000 each.

Arnold is being represented by Nashville attorney Thomas Dundon with Nashville law firm Neal & Harwell. Dundon was unable to appear in court, and his partner Jim Thomas went in his stead.

“He looks forward to his day in court,” Thomas said.

After the hearing, Arnold declined to comment, but shook a reporter’s hand as he walked out of the courtroom. Russell left without commenting, walking directly to an SUV waiting for him outside.

According to the indictment, Arnold, 40, Russell, 49, and Vanderveer, 58, each paid $3,000 into the e-cigarette company. Vanderveer started the business, and Arnold and Russell signed up Rutherford County for the program. They promoted the business as a success, the indictment says, and made it appear profitable for the county.

Inmates at the 958-bed Rutherford County Adult Detention Center became JailCigs’ biggest customers, purchasing about 10,500 units between October 2013 and April 2015.

Though leaders in other counties were told they’d get $5 commission per e-cigarette sold, that offer was not made in Rutherford County, the indictment says.

The charges say Arnold, Russell and Vanderveer received hefty checks from the company regularly between December 2013 and April 2015.

Arnold received more than $66,000, according to the charges. That's just more than half his annual salary of $125,000. Russell received more than $52,000 (his annual salary is about $71,500) and Vanderveer more than $49,000, according to the charges.

And then, the indictment says, the men tried to cover up their involvement in the company.

940 Investigations: Sheriff's Office under scrutiny

The indictment says:

Arnold did not disclose he had received money from the company to the Tennessee Ethics Commission in 2014, while he was running for sheriff.

Arnold and Russell denied they were benefiting from the company when asked by the county auditor in July 2014. They also claimed the arrangement had been approved by the county attorney and auditor, though it had not been.

Russell sent emails to jail officials in other counties promoting the program without disclosing his role in the company.

In April 2015, Arnold was interviewed by the state comptroller’s office. He acknowledged his statements to the press — that he did not profit — were untrue. He suggested he loaned his aunt — Vanderveer’s wife — money and checks he received were repayment of that. He said he’d have to look up the last date of a deposit, though it was only three days earlier.

Vanderveer met with a Tennessee sales representative for JailCigs in April 2015 and told her that "Joe" wanted her to destroy records of commission payments from the county going to "Robert or any of us," Smith said.

Smith said if the men are convicted, some of the counts carry up to 20 years in prison. It is unlikely Arnold and the others would get that long of a term, however, based on federal sentencing guidelines.

During a press conference on the ninth floor of downtown Nashville’s Estes Kefauver Federal Building, Smith, acting Assistant Special Agent in Charge of the Memphis Division of the FBI Matt Foster and Tennessee Bureau of Investigation Director Mark Gwyn urged the public not to let the case alter their perception of other law enforcement officers.

"We don’t want this indictment or the actions of these individuals to take away from the hard work and dedication of the majority of law enforcement officers who work in this state, including many who work in the Rutherford County Sheriff’s Office," Gwyn said.

Smith said he could not comment on whether additional people would be charged in the case.

Given the federal case, no Rutherford County charges will be filed against the sheriff and the others named in the indictment. Rutherford County District Attorney Jennings Jones said the indictment was the end result of an investigation that began with a few questions brought to him by County Mayor Ernest Burgess.

“In February 2015, we — my office — we were contacted by the mayor, Ernest Burgess. We met at my office along with Lisa Nolen, county finance director. They made me aware of some financial irregularities at the Rutherford County Sheriff’s Office."

Jones said after the issues were reviewed by his office, it was brought to the attention of the state comptroller and the Tennessee Bureau of Investigation.

“Then the federal agents came in on it,” Jones said. “That investigation has now resulted in a federal indictment."

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arnoldindictment.pdf

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Reach Stacey Barchenger at 615-726-8968 or on Twitter @sbarchenger.