DATE: Friday, September 5, 1997             TAG: 9709050828

SECTION: SPORTS                  PAGE: C1   EDITION: FINAL 

SOURCE: BY HARRY MINIUM AND LYNN M. WALTZ, STAFF WRITERS 

DATELINE: NORFOLK                           LENGTH:   77 lines

NBA REFEREE FROM BEACH PLEADS GUILTY TO TAX EVASION ``HANK'' ARMSTRONG TRADED FIRST-CLASS PLANE TICKETS FOR COACH FARE, POCKETED DIFFERENCE.

Henry Clinger ``Hank'' Armstrong on Thursday became the third NBA referee to agree to cooperate with federal prosecutors in an ever-widening investigation of travel expense fraud in the league.

Armstrong pleaded guilty in federal court to pocketing $160,464 in tax-free income in the expense scheme that could involve as many as 17 other NBA refs who allegedly traded in first-class airline tickets for coach fare and pocketed the difference.

Armstrong, a Virginia Beach resident and former Cox High teacher and coach, joins Williamsburg's Jesse Kersey and Harrisonburg resident George T. Toliver in agreeing to provide evidence and testify against fellow refs.

A fourth NBA ref - Mike Mathis of Cincinnati - has also been indicted.

In return for his cooperation, the government dropped five charges of tax evasion against Armstrong, who pleaded guilty to one count. He faces up to three years in prison, up to $250,000 in fines and must pay back taxes and penalties. He will be sentenced Dec. 2.

Armstrong had faced up to 18 years in prison and a fine of $1.5 million if convicted on all six counts. Armstrong's attorney, Franklin A. Swartz, said it was apparent after Toliver and Kersey pleaded guilty and agreed to cooperate that Armstrong had to do the same.

``This was in Hank's best interest,'' Swartz said.

Armstrong admitted to pocketing the tax-free cash from 1989 through 1993 by providing fake receipts to the NBA for first-class travel while he actually traveled less expensively. The NBA deducts the price of tickets from income statements, or W-2 forms, it submits to the IRS for each employee.

Amrstrong obtained falsified airline receipts and invoices from a Virginia Beach travel agent and sent them to the NBA so the league officials would believe the higher priced tickets were actually used.

According to federal prosecutor James A. Metcalfe, NBA refs were repeatedly told as early as 1989 that pocketing travel money without paying taxes on it was illegal.

Armstrong was warned by federal judge Henry C. Morgan Jr. during a 30-minute hearing that he must adhere to the plea agreement and that even if he does, there is no guarantee he won't serve time in jail.

The plea agreement calls for Armstrong to be ``reasonably available'' for conferences with federal officials, to testify truthfully before grand juries and trials and to submit to a polygraph test if asked to.

Swartz seemed to signal that Armstrong will cooperate fully at the end of the hearing when he turned to Metcalfe and said: ``We're all on the same team now.''

Asked if he expects Armstrong to avoid serving time in prison, Swartz said: ``We're hopeful. But we don't know.''

Armstrong, 55, is a New Jersey native who prior to his indictment had been heralded as a self-made success story. He began officiating while a student at Catawba College in Salisbury, N.C., and broke into high school officiating when he moved to Virginia Beach three decades ago.

By the mid-1970s he was considered one of the state's top high school referees and began working college basketball games. By the early 1980s he was doing college games for several conferences, including the ACC, which considered Armstrong one of its top officials. He joined the NBA in 1988 and worked eight seasons.

It appears doubtful Armstrong will work in the league again. He was suspended with pay by the NBA when the indictments were announced earlier this year. NBA officials haven't said whether officials convicted in the travel scheme will be allowed to continue, but Kersey and Toliver resigned from the NBA shortly after they were convicted. Armstrong has not resigned.

NBA spokeswoman Terri Washington said league officials would have no immediate comment on Armstrong's guilty plea.

Tony Brothers of Norfolk and LeRoy Richardson, formerly in the Navy at Dam Neck, are also NBA refs. Neither has been implicated in the travel expense scheme. ILLUSTRATION: Color Photo

``Hank'' Armstrong is the third NBA referee to plead guilty in the

expense scheme. KEYWORDS: FRAUD

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