Adult Storeowner, Accountant Plead Guilty to Tax Fraud

NASHVILLE, Tenn. — Jerry C. Pendergrass, owner of various adult bookstores in Chattanooga and elsewhere, and James M. Hammonds, a former IRS agent from Cleveland, Tenn., pled guilty Tuesday to eight counts each related to filing false income tax returns before U.S. District Judge Robert L. Echols in Nashville.

Both will be sentenced early next year.

Pendergrass owned or was involved in adult entertainment establishments including adult bookstores in the Clarksville, Nashville and Chattanooga areas, and was also the sole shareholder of 822 Corporation, doing business as Metro News, aka the World’s Largest Adult Bookstore. Also, Pendergrass was involved in the Outer Limits of Nashville, a now-closed nightclub.

Hammonds, a former special agent with the Internal Revenue Service (IRS) Criminal Investigation Division, operated Financial Investigations Inc.

Pendergrass admitted to filing false personal income tax returns and false corporate tax returns with the IRS for tax years 1999 through 2002, and that he failed to report more than $3 million in income on his personal income tax returns for that period of time. The unreported income included rental payments and cash received from Metro News.

Pendergrass also admitted that his corporate tax returns filed for those years included approximately $423,000 in false deductions and approximately $195,000 in false cost of goods sold computations. These false items included payments for personal expenses of Pendergrass that were falsely claimed as corporate expenses.

Pendergrass admitted to owing approximately $1,354,000 in income taxes to the U.S. as a result of filing these false returns.

Hammonds admitted to preparing Pendergrass' false and fraudulent personal and corporate tax returns. Hammonds also admitted to making fraudulent adjustments to 822 Corporation’s balance sheet for 1999 through 2002 because he knew Pendergrass had diverted corporate funds for personal use.

Hammonds admitted that Pendergrass had received substantially more income in each year than he reported on his personal income tax returns, and that the false returns resulted in a tax loss to the U.S. between $80,000 and $200,000.

Pendergrass and Hammonds were charged in a 19-count indictment returned on Aug. 18, 2006: Pendergrass with two counts of conspiracy to defraud the U.S., one count of income tax evasion and eight counts of filing false income tax returns, and Hammonds with one count of conspiracy to defraud the U.S. and eight counts of aiding and assisting in the preparation of false income tax returns.

On May 18, Pendergrass was found guilty by a jury on one count of income tax evasion with an additional tax loss of $428,704. The trial on the remaining counts of the indictment was scheduled to begin Tuesday, but both defendants pled guilty rather than proceed to trial.

Copyright © 2026 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More News

Kheper Releases New 'Adult A...Z' Couples Game

Kheper Games has released its new Adult A...Z party game.

LATAM in Focus: A Look at the Trends Shaping Latin America's Pleasure Products Market

Across Latin America, pleasure shoppers are looking for innovation, but winning their business requires brands to balance aspirational qualities. Consumers are watching every dollar — or peso, Brazilian real, Peruvian sol, etc. — as tariffs, exchange rates and import costs push retail prices upward.

Ofcom Investigates Pornhub's Device-Based UK Age Checks

U.K. media regulator Ofcom has opened an investigation to determine whether Pornhub parent company Aylo’s use of device-based age verification complies with the U.K.’s Online Safety Act.

Nobü Adds to 'Essentials' Collection

Nobü has expanded its Essentials collection with three new vibrators.

Blush Expands 'B Yours' Collection

Blush has introduced a new vibrating plug from its B Yours Collection.

We-Vibe Debuts 'Shared Touch' Vibe

We-Vibe has introduced its new Shared Touch vibrator for couples.

Kiiroo Introduces New Tyler Wisby Stroker

Kiiroo has debuted the new Tyler Wisby stroker sleeve from its FeelStar line.

France Weighs Ban on Purchase of 'Remote' Sexual Services

The French National Assembly is considering a proposal to criminalize the purchase, and/or facilitation by online platforms, of sexual services performed remotely by streamers and custom content creators.

Orion Debuts 'Masturbator 12' From 'WYNE' Collection

Orion Wholesale has introduced the new Masturbator 12 from its What You Never Expected (WYNE) line.

XBIZ Expo Retail Trade Show Heads to L.A. LIVE Jan. 7-10

XBIZ Expo returns Jan. 7-10, 2027, at JW Marriott L.A. LIVE, where pleasure product manufacturers, distributors, retailers and other industry professionals will gather for four days of business, promotion and entertainment.

Show More