Wrestling Promoter Admits Role in Tax Return Fraud

A Paramount TV wrestling promoter pleaded guilty to orchestrating hundreds of false computer tax returns that robbed the government of $1 million, the nation’s largest electronic income tax fraud, federal prosecutors said Tuesday.

Jerome Hearne, 35, pleaded guilty Monday to one count of conspiracy to obtain payment from false claims for federal income tax refunds and to 15 counts of aiding others to file false income tax refunds, said Lourdes G. Baird, U.S. attorney for the central district of Los Angeles. The pleas were entered in U.S. District Court in Los Angeles.

A former producer of women’s wrestling shows on television, Hearne led a group of eight people in a scheme in which more than 200 bogus tax refund claims were filed, prosecutors said. All eight have since pleaded guilty to charges in connection with the case.

Baird said that Hearne and Daphne Thomas, then a tax preparer in the Van Nuys office of H&R; Block, oversaw the recruiting of more than 200 people who were provided with fraudulent documents, including W-2 forms from a bogus firm called Cast Distributing Warehouse. The recruits, who were also provided with fake child-care receipts, then had their income tax returns submitted by computer from Thomas’ office between March and May of this year, she said.

The IRS paid most of the refunds within two weeks.

Law enforcement authorities have said that filing false tax refund claims by computer may be the tax crime of the 1990s. Federal officials have said a disproportionate number of computerized tax fraud cases have occurred in Southern California.

Electronic transmission of tax returns has been aggressively promoted by the IRS because it allows returns to be processed in a matter of days rather than weeks. For the 1990 tax year, about 7 million of the country’s more than 100 million taxpayers filed returns by computer.

Hearne pleaded guilty just before his trial was scheduled to begin Tuesday morning before Judge Laughlin E. Waters. He did not have a plea agreement with the government and six of the other co-defendants were planning to testify against him, prosecutors said.

Hearne faces a maximum sentence of 85 years in federal prison and a maximum fine of $4 million on the charges he pleaded guilty to, prosecutors said. His sentencing is scheduled for Jan. 22.

Another defendant, Cheryl Jones, 39, of Van Nuys, who pleaded guilty in September to one count of conspiring to file fraudulent returns, is scheduled to be sentenced by Waters today.