John Vanderveer, 59, of Marietta, Georgia, pleaded guilty today in United States District Court to federal charges of obstruction of justice, announced Jack Smith, Acting U.S. Attorney for the administration of this case.
Vanderveer was indicted in May 2016 along with his nephew, Robert Arnold, the former Sheriff of Rutherford County and former Chief Administrative Deputy, Joe L. Russell II, for their roles in the formation and operation of JailCigs, LLC. The indictment alleged that the defendants enriched themselves by selling electronic cigarettes, through JailCigs, LLC, to inmates at the Rutherford County jail, while concealing and misrepresenting Arnold and Russell’s ownership of the business, and paying Arnold commission payments that were in fact owed to Rutherford County.
In the hearing before Chief U.S. District Judge Kevin H. Sharp, Vanderveer admitted that he, along with Robert Arnold and Joe Russell II, formed JailCigs, LLC on October 3, 2013, and created a business plan wherein they would sell electronic cigarettes to inmates confined to the Rutherford County Jail and market the products to other jails throughout the country. Vanderveer also admitted that he later told the Tennessee sales representative for JailCigs to destroy her commission sheets so the company could provide fraudulent versions that would show the payments going to her, rather than to Sheriff Arnold. Vanderveer also admitted that he received $49, 545.50 from the sale of JailCigs to inmates at the Rutherford County Jail.
Under the terms of the plea agreement, the recommended guideline range is 18-24 months in prison. Vanderveer will also pay restitution to Rutherford County in the amount of $52,500. Vanderveer will be sentenced on May 19, 2017.
Arnold and Russell have pleaded guilty to wire fraud, honest services fraud, and extortion under color of official right and are awaiting sentencing.
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.