THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Thursday, February 13, 1997 TAG: 9702130306
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY LYNN WALTZ, STAFF WRITER
LENGTH: 67 lines
Referee Henry C. ``Hank'' Armstrong of Virginia Beach, who earns his living blowing the whistle on illegal moves in the National Basketball Association, has legal problems of his own: a federal indictment for felony tax evasion.
A U.S. District Court grand jury on Wednesday indicted Armstrong on charges that he under-reported income and over-reported travel expenses in an elaborate scheme involving a Virginia Beach travel agency. A second NBA referee, George T. Toliver of Harrisonburg, was also indicted Wednesday in Abingdon.
Indictments say Armstrong and Toliver ``downgraded'' first-class airline tickets provided for NBA travel to cheaper coach-class tickets, pocketed the difference and illegally failed to pay taxes on the money.
The two indictments are the first to stem from a two-year investigation by the Internal Revenue Service. About a dozen other NBA referees could eventually be indicted, according to news reports.
Armstrong, of the 1600 block of Dey Cove Drive, and Toliver were relieved of their officiating duties Wednesday as a result of the indictments, said Russell T. Granik, deputy commissioner and chief operating officer of the NBA.
``The NBA and the referees have agreed that they will not be assigned to officiate while the charges are pending,'' Granik said. ``We will continue to pay them their salaries and benefits.''
While referees have the right to downgrade first-class tickets to coach-class - a major bargaining chip in salary negotiations - they are required to report the extra money as income and pay taxes on it.
Armstrong, the indictment says, worked out the following scheme: He received first-class tickets from the NBA and cashed them in at a Virginia Beach travel agency, which was not named.
The travel agency would give him tickets at the most economic rates available. The agency also allegedly supplied him with the passenger portion of the voided first-class tickets, which he allegedly turned in to the NBA as proof of use.
Then, the NBA prepared W-2 forms based on the receipts, which ``substantially'' understated Armstrong's income, the indictment said. Finally, it says, the travel agency provided him with false invoices showing he had paid for the first-class tickets. Armstrong allegedly gave his tax preparer these false documents to file his tax return.
Wednesday's indictments did not spell out the total amount each referee is accused of pocketing, although the indictment in Toliver's case said he failed to report about $47,000 in two years. News reports said referees earned as much as $100,000 from the scheme over a five-year period.
The IRS became aware of the scheme after the wife of a referee going through a divorce divulged it, The Boston Globe reported in October. Last fall, the IRS alerted the NBA that 12 to 15 referees were being investigated and could be indicted.
Referee salaries range between $77,000 and $224,000, depending on experience. Armstrong is in his ninth season. League spokesman Chris Brienza said that would put him ``somewhere in the middle'' of the salary range.
Armstrong faces a maximum of 18 years in prison if convicted of tax fraud. His initial court appearance is scheduled for Feb. 26.
Toliver faces up to nine years in prison if convicted. Both could also face fines if they are convicted: Armstrong up to $1.5 million and Toliver up to $750,000, authorities said. MEMO: Staff writer Ed Miller contributed to this report.
KEYWORDS: INDICTMENT NBA REFEREE FELONY TAX EVASION
INVESTIGATON IRS