|Former IRS agent, 2 Nashville attorneys and adult entertainment owner indicted in tax fraud conspiracy
(From U.S. Attorney and staff reports)
NASHVILLE Jerry C. Pendergrass, owner of various adult entertainment establishments in Nashville and elsewhere, has been indicted on two counts of conspiracy to defraud the United States, one count of income tax evasion, and eight counts of filing false tax returns. Also charged in the indictment were former Internal Revenue Service Agent James M. Hammonds, of Cleveland, Tenn., and Nashville attorneys Alan L. Saturn and Alan D. Mazer.
Hammonds, who operated Financial Investigations, Inc. and was a former Special Agent with the Internal Revenue Service Criminal Investigation Division, was charged with one count of conspiracy to defraud the United States and eight counts of aiding and assisting in the preparation of false income tax returns. Saturn and Mazer, who operated Saturn and Mazer Title Services, Inc., were each charged with one count of conspiracy to defraud the United States and one count of income tax evasion.
According to the indictment, Pendergrass owned or was involved in various adult bookstores in the Clarksville, Nashville and Chattanooga areas that operated under business names including Southern Secrets, Midnite Video, Broad St Video, The Outer Limit of Nashville, Video Express, I-40 Bookstore, and Galerie Erotique. Pendergrass was also the sole shareholder of 822 Corporation, doing business as Metro News, also known as World’s Largest Adult Bookstore.
Two Federal Tax Liens were filed in 1999 and 2000 in Davidson County for $302,059.07 and $263,817.65, respectively, against Pendergrass for tax obligations pertaining to the 1996, 1997, and 1998 tax years.
The indictment charges that Pendergrass, with assistance from Saturn and Mazer, attempted to defraud the IRS by concealing his ownership of real property located at 1049 Hickory Hollow Road, Nashville. Pendergrass purchased the property in August 1996, but failed to record the deed. He sold the property to a third party in August 2000, employing Saturn and Mazer’s company. The indictment charges that Saturn and Mazer prepared paperwork associated with the sale that hid the fact that Pendergrass was the true owner of the property, even though they knew he was the true owner. Pendergrass received more than $300,000 from the sale. The indictment alleges that this was done to avoid the payment of federal tax liens and the seizure of the proceeds by the IRS.
Additionally, Pendergrass and Hammonds are charged with conspiring to hide assets and conceal income and expenditures of Pendergrass and 822 Corporation from the IRS through deceitful and dishonest means. According to the indictment, Pendergrass and Hammonds prepared and filed with the IRS false corporate tax returns for 822 Corporation and false personal income tax returns for Pendergrass for tax years 1999 through 2002.
The indictment further alleges that the corporate returns for these years included approximately $400,000 in false and fraudulent deductions, including personal expenses of Pendergrass and expenses of other businesses owned by Pendergrass. In addition, Pendergrass’s personal expenses were paid by the corporation and were not included as income on his personal income tax returns. The indictment charges that Pendergrass failed to report approximately $3,000,000 of additional income during these years, including skimmed cash receipts from 822 Corporation and rental income. Hammonds is also alleged to have prepared fraudulent balance sheets for the corporate returns and false financial statements on behalf of Pendergrass and 822 Corporation, which were submitted to the IRS.
This investigation was conducted by IRS Criminal Investigation Division. Assistant U.S. Attorney Jimmie Lynn Ramsaur and Trial Attorney Jenny Grus from the Department of Justice - Tax Division will represent the government.