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 © 2025 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

Le Wand's 'Petite' Highlighted in NY Magazine Article

Le Wand’s Petite massage wand has been recognized in NY Magazine's The Strategist round-up of top-rated massagers.

UPDATED: Supreme Court Rules Against Adult Industry in Pivotal Texas AV Case

The U.S. Supreme Court on Friday issued its decision in Free Speech Coalition v. Paxton, striking a blow against the online adult industry by ruling in support of Texas’ controversial age verification law, HB 1181.

North Carolina Passes Extreme Bill Targeting Adult Sites

The North Carolina state legislature this week ratified a bill that would impose new regulations that industry observers have warned could push adult websites and platforms to ban most adult creators and content.

Orion Debuts 'Gyro' Stroker From You2Toys Line

Orion Wholesale has introduced the You2Toys Gyro stroker.

Share Satisfaction Debuts 'Evolve Penis Pump' Collection

Wellness brand Share Satisfaction has introduced its new Evolve Penis Pump line.

ULoversDoll Debuts 'Isabella' Love Doll

ULoversDoll has added Isabella to its Top-Cydoll collection.

Supreme Court Ruling Due Friday in FSC v. Paxton AV Case

The U.S. Supreme Court will rule on Friday in Free Speech Coalition v. Paxton, the adult industry trade association's challenge to Texas’ controversial age verification law, HB 1181.

Ofcom: More Porn Providers Commit to Age Assurance Measures

A number of adult content providers operating in the U.K. have confirmed that they plan to introduce age checks in compliance with the Online Safety Act by the July 25 deadline, according to U.K. media regulator Ofcom.

Motorbunny Launches Direct Wholesale Program

Motorbunny has launched a direct wholesale program for brick-and-mortar retailers and ecommerce sites.

Biird Introduces 'Together' Intimacy Card Game

Biird has debuted its new card game, Together, designed to promote intimacy in couples.

Show More