No Heir Apparent for Toppled Porn King : Justice: Home video has decentralized the industry. But others are wary after the Van Nuys man’s tax conviction.
The conviction of Reuben Sturman, whom police once called America’s Kingpin of Pornography, is setting off a scramble among competitors eager to move in on the X-rated territory he staked out for two decades, authorities say.
But a number of pornography experts argue that the industry has changed so much that it will be difficult for any one person to emerge as the dominant figure that Sturman, with his preference for European luxury cars and finely tailored clothes, has been.
Sturman, 65, who owns a 5,610-square-foot, Tudor-style house in Van Nuys, was convicted in U.S. District Court in Cleveland on Nov. 17 of 16 counts of conspiracy, tax fraud and violating foreign banking requirements.
He was accused of failing to pay taxes on $2.7 million in income between 1978 and 1982, and could be sentenced to up to 70 years in prison, according to federal attorneys. Sturman’s son, David, and business associate Ralph Levine were each convicted of one count of conspiracy. Four other Sturman employees pleaded guilty to charges ranging from lying to a grand jury to making false statements on tax returns.
The elder Sturman still faces trial in Las Vegas next year on obscenity and racketeering charges. He is free on a $1-million bond, $500,000 of which was put up by a Dutch corporation, Scala Agenturen, B.V. Sturman has been ordered to appear in Cleveland federal court today to disclose the nature of the firm.
Sturman was unavailable for comment, but word of his conviction was deeply felt in the industry he helped create. “Nobody likes to see this happen to a person who has devoted so many years to the industry,” said Marty Turkel, vice president of VCA Pictures in Chatsworth.
“This is a sobering lesson that obviously the income tax laws are not to be evaded,” added William Margold, a well-known promoter, producer and actor in X-rated films.
Sturman is not the only well-known person in the adult entertainment industry to have run afoul of the IRS. Herbert Streicher, better known as Harry Reems--his stage name in “Deep Throat” and scores of other sex movies--was recently placed on five years probation and ordered to pay taxes on $35,000 in unreported income dating to 1982.
“We are continuing to look at all phases of the adult entertainment industry, including performers, producers, directors and distributors,” said C. Philip Xanthos, branch chief of the IRS Criminal Investigation Division in Los Angeles.
Sturman for years has been the industry’s best-known off-camera figure. Though he took care to shield his dealings from outside scrutiny, he built an empire of hundreds of adult bookstores across the United States and Europe, a North Hollywood warehouse and factory containing sexual paraphernalia and several video companies that produced X-rated movies, authorities said. One law enforcement source said Sturman’s businesses took in between $1 million and $2 million a day.
The size of his fortune is a matter of speculation, but the law enforcement source, who has followed Sturman’s activities for several years, put it at more than $100 million.
But despite the fact that he had wielded power since the early 1970s, experts doubt that his departure will have a crippling effect on the erotica industry.
They explain that the adult entertainment business has become increasingly decentralized in recent years with the growth of home video, making it less subject to outside control. Dozens of companies have sprung up that are eager to supply low-budget sex films to video stores across the nation. A decade ago, it cost an average of $150,000 to produce an X-rated film, experts say. But today, a film can be shot using videotape for as little as $7,000.
Even before Sturman was found guilty in Cleveland, people had begun moving into areas he once controlled, law enforcement authorities said. Several adult bookstores have opened in cities where he was once dominant in the adult entertainment business, said one law enforcement source who asked to remain anonymous.
Steve Jigger, attorney in charge of the Cleveland office of the government’s Organized Crime and Racketeering Strike Force, said Sturman has sold magazine distributorships in Denver, Detroit and Chicago. And Los Angeles law enforcement sources said he has sold several video companies in Southern California. These sources also report jockeying for other portions of his holdings in anticipation of his incarceration.
Sturman, who started in Cleveland when the industry was called the “girlie” business, began having trouble with the IRS 12 years ago. That was when the government started investigating reports that “people involved in this industry were diverting large amounts of income and failing to pay taxes on that income,” Jigger said.
A witness testified at the trial in Cleveland that a courier from Chicago delivered to Sturman in an attache case tens of thousands of dollars that had been skimmed from peep machines, Jigger said. The case would be emptied and sent back by United Parcel Service, he said.
But the critical evidence against Sturman was supplied by Swiss banking officials, who opened up to American investigators accounts in which he and his associates had hidden money, Jigger said. This was the first time that a mutual assistance pact, which allows access to Swiss bank accounts, has been used in a tax revenue case. The Swiss agreed to open their records, according to Jigger, only after the U.S. government provided proof of Sturman’s association with organized crime.
While the IRS declined to discuss the information it provided to the Swiss, the 1986 report by the Attorney General’s Commission on Pornography said Sturman was “closely associated with known organized crime family members,” especially Robert DiBernardo, identified in the report as a member of the Gambino (and/or De Cavalacante) crime families in New York and New Jersey.
The government pornography report quoted reputed mobster James Frattiano as saying that “Sturman and DiBernardo have had a long-term business relationship . . . they were partners, plus . . . if DeBe wanted (Sturman) to do something, he (Sturman) would do it.”
The report said Sturman got his start more than 20 years ago as a “small-time candy, tobacco and comic book distributor who moved slowly into pornographic magazines.” He eventually built his business into a worldwide enterprise.
Sturman operated out of a nondescript warehouse in a Cleveland ghetto, mostly through a company called Sovereign News, sources said. But government attorneys and law enforcement authorities said he set up a crazy quilt of corporations over the years to make it more difficult to unravel his business affairs.
The federal pornography report stated that by 1986 Sturman had control of 200 businesses in 19 states and six foreign countries. While he started out distributing magazines and putting peep machines into adult bookstores around the country, he moved into the video business when it boomed in the early 1980s, authorities said.
As his empire grew, he acquired a Rolls-Royce and favored expensive Bijan fashions, authorities said. One investigator said he is one of only a handful of people with an unlimited line of credit at one of the best-known Las Vegas casinos.
For 1979, according to IRS records, he declared an income of $1,237. But the IRS said his actual, adjusted income was $792,895 more than that. During the five-year period ending in 1982, he declared a total of $344,261, but the government said he actually earned $3,079,973, Jigger said.
Los Angeles vice authorities said Sturman moved to Southern California several years ago. His house on a quiet Van Nuys street is on a football-field-size lot surrounded by a five-foot-high fence and iron gates. When forced to appear in public for court hearings, he often hid his face behind a plastic Groucho Marx nose and glasses.
After DiBernardo disappeared several years ago, incidents of violence occurred that organized crime experts in Los Angeles think may have been directed at Sturman. These included a foiled plan to plant a bomb in a car driven by a Sturman associate in Chicago, as well as the firebombing of another associate’s house in Texas, experts said. Authorities said DiBernardo was a go-between among the various crime families involved in pornography, and that once he was gone, powerful figures such as Sturman lost a valuable protector.
Two law enforcement experts, who asked not to be identified, said there could be some new trouble if Sturman goes to jail, as outsiders move into his territory. But others say Sturman has helped to reduce the possibility of violence by voluntarily divesting himself of assets. One source said he may already have unloaded the majority of his businesses, although some authorities said they think he might still be active behind the scenes in at least some of these firms.
Sgt. Don Smith, a Los Angeles Police Department pornography expert, said Sturman has sold three video companies in Southern California: Vidco, 4 Play Video and Lipstik Video. Smith said Sturman divested himself of the assets to avoid forfeiture under the RICO racketeering statute, under which he will be prosecuted in Las Vegas in March. RICO stands for Racketeer Influenced and Corrupt Organizations Act.
There are reports, law enforcement sources said, that Sturman also has begun selling peep machines located in bookstores around the country. Authorities believe the machines, into which a customer places quarters to watch a portion of an adult movie, were the principal source of the illegal skimming from Sturman’s businesses.
In the 1970s, Smith said, there were only a handful of film distributors, and mob influence was extensive. But today, there are 48 companies nationwide--38 of them in Los Angeles, he said. Most are in the San Fernando Valley.
“The industry is so splintered now,” Turkel said. “Reuben hasn’t had the effect he had 15 years ago.”
The industry also has lost some of its outlaw image now that adult films can be rented at mainstream video stores. In the 1970s, said Turkel, it was “an era of dark glasses and fedoras. Now it’s shirt and tie.”
Must-read stories from the L.A. Times
Get the day's top news with our Today's Headlines newsletter, sent every weekday morning.
You may occasionally receive promotional content from the Los Angeles Times.