Where are all the NBA referees going, long time passing?
The scandal no one wants to acknowledge has claimed four of them, including two of the most highly rated, Jess Kersey and Mike Mathis. As many as 15 more are said to be at risk, although league officials and leaders of the referees' union declare their lack of knowledge.
"We don't know," Deputy Commissioner Russ Granik says. "I am told other indictments are possible. We don't have any hard information. We're not privy to inside information."
Says Howard Pearl, director of the National Assn. of Basketball Referees: "I'm hopeful there will be no further prosecutions, but that's a matter the government will have to decide."
Kersey, Hank Armstrong and George Toliver have pleaded guilty to submitting fake airline receipts to conceal from the IRS proceeds from downgraded tickets. Mathis has been indicted on similar charges and has been suspended by the league.
League officials note no one else has been implicated, but many referees are waiting uneasily.
Says a veteran official: "The only time you can get away from it is when you're refereeing. I've spent more than $50,000 in legal fees."
As part of their guilty pleas, Kersey and Armstrong promised to cooperate with prosecutors. In a statement of fact accompanying his guilty plea, Kersey admitted he got fake receipts from a travel agency in Columbia, S.C., which, he said, "produced [them] for about 15 NBA referees."
According to Kersey, the referees were aware of what they were doing.
Said the statement, signed by Kersey:
"On a number of occasions, defendant [Kersey] discussed with other referees the methods of concealing [from the IRS] 'downgrading' income. The fact that many of them were concealing 'downgrading' income was widely known among the referees and the defendant. On some of the occasions when he discussed downgrading methods with other referees, defendant told them that he dealt in cash so his transactions would not be easily traceable."
Kersey also admitted understating his income to the IRS, lying to IRS agents when asked about it and discussing his technique of concealing income with other referees.
Downgrading tickets and pocketing the difference would constitute fraud in many companies, but the referees had been granted the right to do that in collective bargaining with the league.
However, as IRS regulations changed, the referees were told they would have to be taxed on their extra income, unless they could show they were spending all the expense money they received. Kersey, Toliver and Armstrong have admitted submitting fake receipts--"spoiled" first-class tickets provided by travel agencies.
Court papers demonstrate the NBA repeatedly warned referees they would have to pay taxes on the extra income. In addition, Fred Slaughter, then head of the NABR, testifying at a hearing before the Toliver case, produced what prosecutors called "the Al Capone letter," showing he warned union members in 1990:
"Unless a referee has the midlife vacation wishes of Al Capone, I urge each of you not to try to get cute with your receipts."
Kersey, Armstrong and Toliver, all Virginia residents, had what amounted to open-and-shut trials. Kersey pleaded not guilty, with his attorneys blaming the NBA for not notifying the IRS of the full amount of Kersey's salary and expense payments.
However, Judge Robert G. Doumar, hearing the case, told Kersey he would "strongly suggest" he enter a guilty plea, noting to the defense team:
"You may be able to convince the jury that your client is of diminished mental capacity. Your arguments are not persuasive with me."
Kersey, telling confidants he feared he'd have to go to jail otherwise, changed his plea, agreeing to cooperate, stipulating later he had concealed as much as $52,735 in a year (1995). He agreed to serve three years' probation and file corrected returns.
Armstrong subsequently pleaded guilty and also agreed to cooperate. Toliver also pleaded guilty.
Toliver and Armstrong were relatively junior members of the staff, but in 1996 Kersey was the coaches' choice as the NBA's best referee in internal league rankings. Mathis was in the top five of both the coaches and the general managers.