Suspect in Black Market Trial on Video

Printed August 26, 2004.
Source: Tennessean
Section: Local
Edition: 2ND
Page: 1B

Macon official given $2,600 for tobacco, prosecutors say

By ROB JOHNSON, Staff Writer

The surveillance tapes caught Macon County Trustee Donnie Morgan counting out more than $2,600 on the armrest of a diesel pickup truck, cash that federal prosecutors contend was a payout for a load of black-market tobacco.

The U.S. government yesterday put on some of its strongest testimony and evidence in the ongoing jury trial in the Nashville courtroom of U.S. District Judge Aleta Trauger.

The tapes were made by Garth Middaugh, a 33-year-old Macon County man. He has been a farm laborer, a gas-station owner, a bookie at his local country club, a tobacco warehouse worker and a crucial cog in the black-market tobacco market operation near his Lafayette hometown.

Tobacco farmers’ sales are limited by government quotas, and their so-called “marketing cards” allow them to sell only tobacco that they’ve grown on their own land.

But in December, when farmers are selling their cured crop at their local receiving station, they might find themselves with more to sell than the U.S. Department of Agriculture allows. Or, they might find themselves short of their allotment and may be looking for a source to fulfill the remainder of their quota. Falling short of the quota one year usually means getting a smaller quota the next.

That’s where the black market for tobacco comes into play.

Middaugh testified that he had made tens of thousands of dollars helping launder such tobacco funds for a black-market middleman.

Although the middleman was identified in court, Assistant U.S. Attorney T.J. Haycox declined to answer a reporter’s questions about the man’s age, address or whether he has been charged with a crime.

Testifying that he thought he was in too deep in a black-market operation that had earned him about $75,000, Middaugh said he decided to reveal what he was doing to the FBI in 2002. So he looked up the number in the phone book and called the bureau in Nashville.

He said he was under no government pressure to do so and that he agreed to serve as a confidential informant without any legal guarantees that he wouldn’t be prosecuted for his past actions.

Under the agents’ supervision, Middaugh testified, he set out to document on tape the details of the thriving black-market tobacco business.

In December 2002, when the tape was rolling at the E.J. Parker receiving station where Middaugh worked unloading farmers’ cured tobacco and getting it weighed, Morgan drove up unexpectedly to sell his tobacco.

The government contends that Morgan was never a planned target in the undercover investigation. But when Middaugh asked whether Morgan might need “pounds or tobacco,” agents and Middaugh interpreted that to signal Morgan’s potential interest in a black-market deal – either to buy some pounds to round out his quota or to unload some tobacco that put him over the limit.

That set in motion a series of discussions with Middaugh, according to the government, that eventually sent Middaugh to Somerset, Ky., to pick up a load of tobacco at a warehouse at 4 a.m. one December morning.

His federal handlers were tracking him and monitoring the trip, frisking him beforehand for weapons and cash and searching his trailer to make sure it was empty when he set off for Kentucky.

Middaugh testified that he drove back to Tennessee, mixed in the Kentucky tobacco with Morgan’s crop at the receiving station, got it weighed and saw to it that it was sold to cigarette manufacturer Philip Morris.

Middaugh testified that he collected the $5,603 check, drove to pick up Morgan, and together they went to Morgan’s bank where he cashed the check and returned to the truck with a stack of $50 bills that he counted out for Middaugh.

It was payment, Middaugh said, for making the 2,648-pound black-market deal happen. The rate was a $1 a pound.

The next summer, federal agents confronted Morgan and charged him.

By then, Middaugh had left town, saying that he knew word would get out about his government cooperation. But he returned in the fall.

And one day, as he was leaving the U.S. post office in downtown Lafayette, he encountered Morgan at the door. Middaugh says Morgan jumped him.

Morgan’s attorneys, Peter Strianse and Kim Hodde, have argued that it’s the other way around.

Middaugh called the FBI and told agents that he had been beaten by Morgan, and the agents instructed him to go to the Macon County Sheriff’s Department to swear out a warrant.

Middaugh had a small scratch on his temple and a swollen lower lip and was later treated with antibiotic cream and a Band-Aid.

For that incident, Morgan, 51, has been charged with retaliating against a federal witness in addition to the false-statement charge relating to the allegations that he passed off someone else’s tobacco as his own.

Late yesterday, the government rested its case, and Morgan took the stand in his own defense, describing for the jury his 18-year political career and the back-breaking work it takes to raise a crop of tobacco.

The trial resumes today.

Rob Johnson can be reached at 664-2162 or at rhjohnson@tennessean.com