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

Hismith Introduces 'Max 200W' Sex Machine

Pleasure brand Hismith has debuted its new Max 200W sex machine.

Orion Expands 'Bad Kitty' Line

Orion Wholesale has added two new harness sets to its Bad Kitty collection of fetish accessories.

Liberator Introduces 'Luxe Faux-Fur' Throw Collection From 'Fascinator' Line

Liberator has debuted its Luxe Faux-Fur throw blanket collection from its Fascinator line.

XR Brands Debuts 'Jock Premium' Squirting Dildos Collection

XR Brands has introduced its Jock Premium collection of squirting, silicone dildos.

Kaotik Labs, Dildos Assorted Ink Distro Deal

Svakom’s male-focused sextech sister brand, Kaotik Labs, has signed a deal with Dildos Assorted (DA) for exclusive online distribution.

Calvista Now Shipping Tenga Products and 'Iroha' Line

Calvista has signed an Australian and New Zealand distribution deal for Tenga and its Iroha product line.

Orion Unveils 6 New Styles From 'Abierta Fina' Line

Orion Wholesale has introduced six new styles from its Abierta Fina collection.

Full Circle Debuts New Pleasure Products for 'Anal August'

Full Circle has introduced its Sparkle-LIT anal plug and My Buddy collection of rechargeable plugs.

Creator and Sexual Wellness Brand Marketplace Platform 'Teasr' Launches

Teasr, an online marketplace for creators and sexual wellness brands that focuses on live-selling and video product demonstrations, has officially launched.

B-Vibe Debuts 'Premium XXL' Collection

B-Vibe has debuted its Premium XXL collection of dildos and anal pleasure products.

Show More