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Former Carolco Chief Hoffman Indicted on Tax Evasion Charges

Courts: Veteran movie producer accused of failing to report income. He calls allegations 'wholly unfounded.'

December 19, 1996|JAMES BATES | TIMES STAFF WRITER

Former Carolco Pictures Chief Executive and veteran movie producer Peter M. Hoffman was indicted Wednesday on tax-evasion charges stemming from a larger federal tax investigation of two other former top executives with the defunct production company.

The two-count indictment, handed up by a federal grand jury in Los Angeles, charges Hoffman, 47, with failing to report and pay taxes on $426,000 that authorities allege he earned in unreported 1989 income from Carolco. Of that amount, $325,000 was in direct payment and $101,457 was expenses, authorities allege. Hoffman did report $617,000 in income in 1989, the government said.

Hoffman, who left Carolco in 1992, is being charged with one count of tax evasion, punishable by a maximum five years in prison and a $250,000 fine. Another count alleges subscribing to a false income tax return, punishable by a maximum of three years in prison and a $250,000 fine.

Sources close to Hoffman suggested that the indictment was aimed in part at "squeezing" the executive to cooperate in a federal tax investigation of high-profile Hollywood producers and former Carolco executives Mario Kassar and Andy Vajna. Assistant U.S. Atty. Monica Bachner, one of the government lawyers handling the Hoffman, Kassar and Vajna cases, declined to comment.

In a statement, Hoffman said the charges in the indictment "are wholly unfounded" and that he will vigorously contest them.

He added that the amount of money in question wasn't income, but rather loans made by Carolco in 1989 to him that he repaid in 1990 using income that was deferred and taxable that year. All told, Hoffman said, the amount of federal tax in dispute is less than $70,000.

Hoffman said Carolco never treated the money as income by withholding tax on it, nor did the company ever require tax forms such as W-2s to be filed. He added that there was "no effort whatsoever to conceal or evade reporting of these payments."

Hoffman's lawyer, Thomas Pollack, questioned why the government is bringing a criminal indictment on the matter.

"This dispute over whether loans made by Carolco to Mr. Hoffman in 1989 should have been treated by Mr. Hoffman as reportable income is the kind of matter the IRS would normally pursue through the civil process," Pollack said.

Hoffman currently heads a company called CineVisions in Culver City and is active in raising financing for film companies. Last year, he helped round up financing to launch Phoenix Pictures, a company headed by veteran studio executive Mike Medavoy and film executive Arnold Messer. For his work, Hoffman got a piece of the company.

Hoffman's indictment is set against the backdrop of the larger investigation into Vajna and Kassar while they were with Carolco. The production company produced such big-budget, top-grossing films as the "Rambo" series, "Terminator 2: Judgment Day," "Basic Instinct" and "Total Recall" before falling on hard times. The company eventually ended up in bankruptcy and liquidation proceedings.

Vajna currently heads Cinergi, producer of such films as the upcoming "Evita." Kassar has a production deal with Paramount Pictures.

A federal grand jury has been investigating for about a year tax issues involving Kassar and Vajna. U.S. Tax Court records show that the IRS is seeking a combined $109.7 million in back taxes and penalties that federal authorities claim the two men owe.

Lawyers for Kassar and Vajna could not be reached. Said Pollack: "I don't want to speculate on whether the decision to pursue this criminally is related to another investigation regarding other individuals."

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