12-08-04 -- Axelrod, Herbert -- Guilty Plea -- News Release

Former Owner of a Pet Supply Company Pleads Guilty in Connection with 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, pleaded guilty today to Count Two of a federal Indictment charging aiding and abetting the filing of a false tax return by the company's former vice president, U.S. Attorney Christopher J. Christie announced.

Axelrod, 77, of Deal, the former owner and director of T.F.H. Publications, Inc. (T.F.H.), entered his plea in U.S. District Court in Trenton before Judge Garrett E. Brown, Jr., who scheduled sentencing for March 14, 2005 at 1:00 pm.

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.

The charge of aiding and abetting the filing of a false tax return by another carries a statutory maximum penalty of three years in prison and a $250,000 fine, according to Assistant U.S. Attorneys Michael Guadagno. Count One of the Indictment, which charges conspiracy to defraud the Internal Revenue Service, was dismissed in return for Axelrod's guilty plea. A German court had not extradited the defendant on the charge in Count One.

Under U.S. Sentencing Guidelines, Judge Brown will determine the actual sentence based upon a formula that takes into account the severity and characteristics of the offense, and the defendant's criminal history, if any. Parole has been abolished in the federal system, defendants who are given custodial terms must serve nearly all that time.

The Indictment and the Apr. 13 and Nov. 12 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 continued to be detained without bail pending sentencing.

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 Martin D. Phanco, 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. Roseland

Robert Kipnees, Esq. Roseland