DATE: Thursday, July 31, 1997               TAG: 9707310395

SECTION: LOCAL                   PAGE: B1   EDITION: FINAL 

SOURCE: BY LYNN WALTZ, STAFF WRITER 

DATELINE: NORFOLK                           LENGTH:   83 lines

REF TO BLOW WHISTLE ON COLLEAGUES NBA OFFICIAL PLEADS GUILTY IN NORFOLK HE WILL TESTIFY AGAINST OTHERS IN TAX SCHEME

NBA referee Jesse Kersey pleaded guilty in federal court Wednesday to cheating on his income taxes and agreed to testify against other referees allegedly involved in an airline ticket scam designed to put tax-free cash in their pockets.

In return for testifying, Kersey, 56, avoided jail time. But he must pay a $20,000 fine and back taxes on more than $100,000 of unreported income, plus interest. Four other charges of income-tax evasion were dropped. Kersey could have been sentenced to 15 years if convicted on all charges.

Regarded as one of the league's top officials, Kersey ended his career Wednesday, resigning after 24 years. His tenure included 14 NBA finals and three All-Star games.

``He was a good guy and a good official,'' Brian McIntyre, NBA vice president of communications, said during an interview Wednesday. McIntyre said Kersey resigned of his own accord.

``You'd have to ask him for his exact reasons why he chose to resign, but we did not force him into it,'' McIntyre said. Kersey, of Williamsburg, could not be reached for comment.

Kersey's guilty plea and sentencing came one week after a federal judge told him it would be in his best interest to negotiate a plea agreement because a jury was not likely to be convinced by his defense.

``I suggest that you make a deal,'' U.S. District Judge Robert G. Doumar told Kersey during a July 23 hearing. ``I strongly suggest it.''

Kersey's deal with federal prosecutors may have implications for three other referees indicted in the scheme, including George T. Toliver, on trial this week in Harrisonburg.

Toliver's attorney argued this week in court that the NBA's reporting rules were too complicated and resulted in confusion by referees when filing taxes. Prosecutors argued that Toliver's motive was greed. Toliver's trial had not concluded Wednesday.

Two other officials facing trial are Henry Clinger Armstrong of Virginia Beach and Mike Mathis of Cincinnati. A dozen more have been implicated in the fraud, but not yet charged.

The referees allegedly cashed in first-class airline tickets, or downgraded them to lower-cost tickets, then pocketed the savings and failed to pay taxes on that money, according to court papers. The scheme apparently was widespread, according to the U.S. attorney's office in Norfolk.

About 15 referees used a Columbia, S.C., travel agent to prepare the ``spoiled tickets,'' or first-class tickets that appeared to have been used, the prosecutor's office said Wednesday.

The NBA depends on the refs to provide receipts and passenger coupons as proof they have used the tickets. The NBA then deducts the value of tickets from the reportable income of referees. The resulting W-2 documents reflect the adjusted amounts.

But Kersey admitted sending the NBA bogus receipts to make it look as though the tickets had been used. In reality, he had either flown free or at a reduced rate, pocketing money without paying taxes.

For example, in 1992, Kersey turned in bogus tickets valued at $41,804, according to court documents. The NBA reduced his income by that amount. But Kersey had actually paid just $20,889 for the tickets and pocketed the difference, tax-free. Then, Kersey filed a fraudulent income-tax return.

By 1994, Kersey filed a tax return that understated his income by $52,735, he admitted. When interviewed by IRS agents, Kersey lied about the airline tickets, he admitted in court documents.

During the hearing, Kersey admitted filing false returns from 1990 to 1993. He agreed to serve three years' probation and file corrected returns.

``On a number of occasions, the defendant discussed with other referees the method of concealing . . . income,'' according to a statement of fact filed with Kersey's guilty plea. ``The fact that many of them were concealing `downgrading' income was widely known among the referees.''

Court papers say Kersey told other referees that ``he dealt in cash so his transactions would not be easily traceable.''

McIntyre said he did not know of any other referees involved in the investigation. ``The fact is, only three or four guys have been indicted. We haven't been told of any more than that now,'' he said.

McIntyre said Wednesday he did not want to comment on speculation that more NBA refs have been implicated.

Wednesday's guilty plea was apparently hastily scheduled. Neither prosecutors nor defense attorneys were available for comment Wednesday. MEMO: Staff writer Steve Carlson contributed to this report. ILLUSTRATION: Color photo

Jesse Kersey

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