The U.S. Gymnastics Federation and its executive director have been accused of questionable financial transactions and are under investigation by the U.S. Justice Department, the Los Angeles Times reported today.

The paper, in a story filed from Indianapolis, said documents it obtained show that the federation failed to report nearly $1.7 million in income over the past two years. The money was collected and spent at the USGF's regional and state district levels. Mike Jacki, executive director of the federation, told the Times the finding is true.Jacki told the paper he became aware of the unreported income a few years after he came to work for the federation in 1983, and he reported the problem to the USGF board of directors.

The allegations have been made by members of the gymnastics community who have gathered documents over three years to show the federation's failure to report revenue to the IRS and a conflict of interest by Jacki and former business associates, the Times said.

Albert Murray Jr., senior litigation counsel for the U.S. attorney's office in Pennsylvania, confirmed for the Times on Tuesday that the documents are under review in Washington, D.C.

Jacki told the Times he is not aware of a Justice Department review.

An IRS agent who requested anonymity, told the Times that non-reporting of more than $1.7 million in revenue violates Section 6033 of the IRS Code. The rule states that tax-exempt entities must file a tax return reporting all revenue.

The agent told the Times that although non-compliance with the regulation would not cause an organization to lose its non-profit status, the USGF could face fines.

Some of the documents under review show failure of the USGF to issue IRS 1099 statements, a form similiar to a W-2 which is issued to non-salaried employees who earn $600 or more.

Another document under review is alleged failure of the USGF to open bidding in 1985 among companies that supply gymanastics equipment, a charge Jacki denied.

Another accusation is that Jacki, while divesting himself of interest in a company he owned with longtime business partner Gerald Fontana, continued to allow the USGF to do business with another company Fontana owned. Jacki neither confirmed nor denied the charge.

"I always thought there was a conflict of interest there but I am only one person," said Les Sasvary, on the USGF board for two terms as a representative of the National Gymnastics Judging Association and as a vice president of the men's program committee.

Sasvary said Jackie Fie, who is influential in the women's program committee of the USGF, is married to one of the owners of American Athletic Inc.

"And the USGF only does business with (Fie's) husband. It's hard for the mind to understand," Sasvary told the Times.

Jacki worked for AMF before he joined the federation, and AMF sold its gymnastics division to Larry Fie and five partners in 1986. AMF has been granted exclusive rights to supply gymnastics equipment to major USGF meets and major meets sanctioned by the federation, the paper said. Jacki denied that he granted his former company a preferred position over other gymnastics suppliers, and denied that Jackie Fie had any influence in the awarding of the contract.

Jacki said AMF was the only company capable and willing to provide equipment on the scale the USGF required.