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

Utah VPN Rule Enforcement Paused in Aylo Lawsuit

Provisions of a new Utah law making adult websites liable if minors in the state circumvent geolocation efforts to bypass age verification, which were set to come into force on Wednesday, have been put on hold until Sept. 3.

Magic Silk Debuts 'Rush' Collection

Magic Silk has introduced its new Rush line of lingerie.

Playharda Introduces 'AquaPulse Trio' Shower Massager

Playharda Wholesale has debuted the AquaPulse Trio shower massager with interchangeable heads.

Sportsheets Releases New Training Video for 'Shadow' Collection

Sportsheets has released its latest training video, hosted by Brand Ambassador Rin Musick, featuring the Sex & Mischief line’s Shadow Collection.

Orion Debuts 'Ultimate Sex Stool' From 'The Banger' Line

Orion Wholesale has introduced the new Ultimate Sex Stool from its Banger line.

Pornhub Unblocks UK Users on iOS Devices, Citing Apple AV Effectiveness

Pornhub parent company Aylo on Tuesday announced that users in the United Kingdom will once again be able to access the popular site if they are using Apple devices and have confirmed their age through Apple’s U.K. age-verification process.

North Carolina Weighing Tax on Brick-and-Mortar Sales of Adult Material

The North Carolina state legislature is considering a bill that would impose a new 10% tax on adult material sold by physical retailers in the state.

Lick Goods Expands Massage Oils Collection

Sexual wellness brand Lick Goods has introduced two new flavored massage oils.

Orion Expands 'Bad Kitty' Line

Orion Wholesale has added six new restraint sets to its Bad Kitty collection of fetish accessories.

BeYourLover Debuts 'Guitar' 2-in-1 Vibe

Pleasure brand BeYourLover has introduced its Guitar two-in-one vibrator and suction device.

Show More