ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Thursday, February 13, 1997 TAG: 9702130072
SECTION: VIRGINIA PAGE: C-3 EDITION: METRO
DATELINE: NORFOLK
SOURCE: LYNN WALTZ LANDMARK NEWS SERVICE
A VENGEFUL EX-WIFE told the IRS about a scam in which referees allegedly traded in their first-class tickets for coach - and illegally pocketed the difference.
Two referees from Virginia who earn their living blowing the whistle on illegal moves in the National Basketball Association have real legal problems of their own: a federal indictment for felony tax evasion.
U.S. District Court grand juries in Norfolk and Abingdon on Wednesday indicted Henry C. ``Hank'' Armstrong of Virginia Beach and George T. Toliver of Harrisonburg for allegedly under-reporting income and over-reporting travel expenses.
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 eventually could be indicted, according to news reports.
Roanoke attorney Guy Harbert of Gentry, Locke, Rakes & Moore is representing Toliver and said his client disputes everything in the indictment.
"I'm firmly convinced that Mr. Toliver is innocent," Harbert said. "He denies that he has done anything wrong."
Armstrong and Toliver, who both once refereed for the Atlantic Coast Conference, were relieved of their officiating duties Wednesday as a result of the indictments, said Russell 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 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, the travel agency provided him 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 allegedly pocketed, although Toliver's says he failed to report about $47,000 in two years. News reports said the 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 and Toliver are in their ninth seasons. League spokesman Chris Brienza said that would put them ``somewhere in the middle'' of the salary range.
Armstrong faces a maximum of 18 years in prison if convicted of tax fraud. Toliver faces up to nine years in prison. Both face fines: Armstrong up to $1.5million and Toliver up to $750,000.
Staff writer Betty Hayden Snider contributed to this report.
LENGTH: Medium: 74 linesby CNB