03-21-05 -- Axelrod, Herbert -- Sentencing -- News Release

Former Owner of a Pet Supply Company Sentenced to 18 Months In Prison for Scheme to Shield Income from the IRS

TRENTON - Herbert Axelrod, the former owner of a Neptune City business that distributed pet products and published pet care books and materials, was sentenced today to 18 months in federal prison for aiding and abetting the filing of a false tax return by the company's former vice president, U.S. Attorney Christopher J. Christie announced.

U.S. District Judge Garrett E. Brown, Jr., also ordered Axelrod to pay a $40,000 fine and serve one year of supervised release upon the completion of his prison term.

Axelrod, 77, of Deal, the former owner and director of T.F.H. Publications, Inc. (T.F.H.), pleaded guilty to Count Two of a two-count federal Indictment on Dec. 8, 2004.

At his plea hearing, Axelrod admitted that in order to conceal severance payments for Gary Hersch, the company's senior vice president of sales and marketing, he assisted with the deposit of severance payments into Swiss bank accounts. Axelrod admitted that Hersch had an employment contract calling for a total of $1.5 million in severance payments made over several years in the event of his termination. According to Axelrod, Hersch was terminated in 1996. Axelrod admitted to assisting Hersch establish the Swiss accounts when he knew Hersch would use the accounts to avoid the payment of taxes due to the IRS.

Axelrod admitted that he agreed with Hersch that no income taxes would be incurred on the severance payments and that T.F.H. would not issue Forms W-2 or 1099. Furthermore, Axelrod also admitted that as part of Hersch's severance, he assisted in the procedure whereby the proceeds of some checks due to T.F.H. were ultimately deposited into Hersch's Swiss bank accounts. Axelrod admitted that a total of more than $775,000 of severance payments were deposited into Hersch's Swiss bank accounts.

In December 1997, Axelrod sold his company to Central Garden & Pet Co. in a stock purchase for $70 million in cash and a $10 million loan, as well as the prospect of additional compensation if T.F.H. realized certain earnings projections, according to the Indictment.

Count One of the Indictment, which charges conspiracy to defraud the IRS, was dismissed in return for Axelrod's guilty plea. A German court had not extradited the defendant on that charge, according to Assistant U.S. Attorneys Michael Guadagno.

The Indictment and the April 13, Nov. 12 and Dec. 8, 2004 news releases regarding this case are available on the U.S. Attorney's Office web site at: www.usdoj.gov/usao/nj/publicaffairs/index.html

Axelrod failed to appear for his arraignment, following his Indictment in April 2004. On June 15, 2004, Axelrod was arrested by German authorities as he arrived at the Tegel Airport in Berlin on a flight from Zurich, Switzerland. The U.S. Attorney's Office successfully sought to have Axelrod extradited pursuant to international treaty. Axelrod arrived back in the United States on Nov. 10, 2004. He has been in U.S. custody since his return.

Christie credited Special Agents of the IRS Criminal Investigation section, under the direction of Special Agent in Charge Patricia J. Haynes; the FBI, under the direction of Special Agent in Charge Joseph Billy Jr., and Postal Inspectors of the Postal Inspection Service, under the direction of Postal Inspector in Charge Thomas C. Van De Merlen in Newark, with developing the investigation resulting in the charges.

The Government is represented by Assistant U.S. Attorneys Michael Guadagno and Joan Thomas of the Criminal Division of the U. S. Attorney's Office in Trenton.

Defense Attorneys: Michael Himmel, Esq. and Robert Kipnees, Esq. Roseland