Opinion ID: 203130
Heading Depth: 2
Heading Rank: 2

Heading: The 2001 Tax Returns (Counts 2 and 3)

Text: Between January and December 2001, Hatch served as a co-host on the morning show of Boston radio station WQSX-FM. In return, the station's operator, Entercom Boston LLC, paid Hatch $70,232 for his appearances from January-March and $321,139 for his appearances from April to December. The $70,232 was paid as W-2 income because Hatch was then an employee of the station. At Hatch's request, Entercom paid the $321,139 to Tri-Whale Enterprises, the S-Corporation founded by Hatch. As noted, Hatch was the sole shareholder of Tri-Whale, and he was required to list any Tri-Whale income on his individual tax return. Hatch deposited the Entercom checks payable to Tri-Whale in a Tri-Whale bank account (labeled Richard Hatch d/b/a Tri-Whale) at the Newport Federal. Savings Bank. Hatch then transferred most of the funds to his personal account at the same bank. In February 2001, Hatch claimed the final part of his Survivor prize: a car valued at $27,074. General Motors sent Hatch a 1099 form reflecting his receipt of $27,074 in income. On April 14, 2001, Hatch appeared as a contestant on The Weakest Link, an NBC game show. The show's producers paid Hatch a small fee and made a $10,000 donation to Horizon Bound. Before the $10,000 check was issued to Horizon Bound, Hatch faxed an NBC representative two documents demonstrating Horizon Bound's tax exempt status, both of which bore the forged signature of Ralph Magee, a friend of Hatch who was unaware that Hatch was holding him out as the treasurer of Horizon Bound. Hatch responds on appeal that Hatch and Magee were domestic partners and that it is a fact of life that spouses and domestic partners sign for each other and Magee had no issue with Hatch using his signature. He further notes that he was acquitted of the charity fraud charges. When Hatch received the $10,000 check payable to Horizon Bound, he deposited it in the Horizon Bound account at Newport Federal Savings Bank. A month later, however, he wrote a $10,000 check on that account to a construction company that was renovating his Middletown home. On April 17, 2001, Hatch spoke at East Boston Savings Bank about his time on Survivor and Horizon. Bound. The bank then wrote Horizon Bound a check for $1,000, which Hatch deposited in the Horizon Bound account. CAM Media and Graphics, which had arranged for Hatch to make his presentation, also wrote a $500 check to Horizon Bound. Hatch deposited this check in his personal account at People's Credit Union. Also in 2001, Hatch received $9,047 in rental income from the Newport property. As she prepared Hatch's 2001 individual tax return and the 2001 S-corporation tax return for Tri-Whale, Wallis made clear to Hatch he was individually liable for any income of Tri-Whale and that such income also needed to be reported on the S-corporation return. Hatch told Wallis about the January-March wage income from Entercom of $70,232, which Wallis included on his individual return, but he failed to disclose the April-December payments of $321,139 Entercom had made to Tri-Whalethe largest source of income Hatch had received that year. Hatch responds that he never received a 1099 or W-2 showing the Entercom income and states, without record citation, that Wallis was aware that the income from Entercom, like all other income, went into Hatch's personal account and thus that she could have discovered the $321,139 by examining the records of Hatch's personal checking account. Hatch's assertion ignores the fact that Wallis testified that Hatch gave her check stubs for which Tri-Whale was the payee, that those stubs did not include anything from Entercom, and that Hatch told her there were no other sources of income for Tri-Whale for that year. When Wallis asked Hatch whether he had opened a bank account for Tri-Whale, suggesting she might want to look at the bank statements, Hatch told her incorrectly that he had not done so. [3] Hatch also failed to tell Wallis about the income from the car, the rental property, and the diverted donations. When Wallis inquired about the car (which she knew Hatch had won), Hatch lied and said he had not yet received it. As he had done the year before, Hatch told Wallis that the rental property had earned no income because it was still being renovated. Based on what Hatch had told her, Wallis prepared a 2001 individual tax return for Hatch which omitted those four sources of income (the second portion of the Entercom payment, the car, the rental property, and the diverted, donations, totaling $374,510) and which incorrectly stated that his income was $228,077 and that he was owed a substantial refund. Wallis also prepared a 2001 S-Corporation tax return for Tri-Whale which did not include the $321,139 in Entercom payments and which accordingly wrongly stated, based on check stubs provided to Wallis by Hatch, that Tri-Whale had received only $68,173 in income. Hatch filed the Tri-Whale return on October 1, 2002 and the individual return on October 9, 2002. As a result, Hatch paid no taxes and received a $44,874 refund. If Hatch had filed returns disclosing his true income, he would have paid $99,319 in taxes. For his defense at trial, Hatch called the contractor who renovated his Middletown residence, in an apparent effort to show that the project had something to do with Horizon Bound, though the witness did not recall for certain whether Hatch had actually spoken to him about the charity. Hatch then called his manager to suggest that at the time he filed the returns at issue in the case, he was distraught over an allegation that he had abused his adopted son. The manager, however, testified the child abuse charge had been dismissed in the summer of 2000, more than two years before the relevant tax filings. He also testified that commissions paid him by Hatch had post-dated the Survivor prize and had nothing to do with it. The attorney Hatch hired in connection with the child abuse charge confirmed that the charge had been dismissed in 2000 but noted that Hatch had filed two related civil lawsuits that lasted into the period when he filed the tax returns. A high school teacher testified that he had run a real camping program called Horizon Bound in the 1970s and 80s, that Hatch had been a camper in the summer of 1979, and that he had given Hatch permission to incorporate a new entity under the name after Hatch won Survivor. He testified, however, that he was unaware Hatch was holding him out as secretary of the new Horizon Bound. Hatch testified on his own behalf. He said that Wallis knew he was going to file the hypothetical tax return which omitted the Survivor income and that she had him sign the letter acknowledging the draft nature of the return so that she could distance herself from what he was doing. He conceded that the commissions he had paid to his manager, agent and attorney had nothing to do with the Survivor prize and claimed that the mistakes on his tax returns were made in good faith and that he intended to file amended returns correcting those mistakes. On cross-examination, Hatch admitted that he had received many 1099s over the years and had reported the income stated on those forms and that he received 1099s reflecting the Survivor prize and car. He acknowledged that three months after the show ended, he authored a book in which he stated he would have to pay taxes on the prize and he had initially set aside $350,000 with the expectation of using some of it to pay taxes. He further admitted that Plotkin had told him that it was clear he had to pay taxes on the prize, that he had failed to report the $320,000 in Tri-Whale income, and that he deposited the $25,000 donation in his personal account and used the money for personal expenses because he felt Horizon Bound owed him money. He testified he used the other $11,500 in donations in a similar way for similar reasons. Lastly, Hatch called accountant Urso to attempt to show that there were certain defects in the tax returns prepared by Plotkin and Wallis regarding issues unrelated to the trial. The court found this testimony largely irrelevant. The government then called two witnesses to rebut Hatch's testimony that someone at People's Credit Union added his name as a payee to the $25,000 donation check.