Hatch gained infamy as a "ruthless" game player by introducing the concept of forming an "alliance" with other contestants on the show. It was this strategy - along with his arrogant attitude and stripping naked during much of the filming...that led to Hatch winning the million-dollar prize.
Blatant Under-Reporting of Income
Although Hatch enjoyed a 5-year "career" after the show, his newfound riches didn't last.
According to the U.S. Attorney's office, Hatch failed to report the $1,010,000 he was paid in winnings on Survivor.
The first accounting firm Hatch hired to prepare his 2001 tax return calculated that he owed $441,501 in taxes. Hatch never filed the return.
He went to a second firm that calculated that he owed $234,807. He failed to file that return as well.
A year or so later Hatch went back to the second firm and asked them to create a tax return that didn't reflect the "Survivor" earnings at all. Surprisingly, the firm agreed to prepare the return, which showed a $4,483 refund - but said that the return was only for "informational" purposes and warned Hatch not to file it...
He decided to file it anyway.
Hatch even went on the nationally-syndicated Howard Stern radio show and gloated about not paying the taxes.
Apparently not only did he not claim his $1,010,000 income from Survivor, but he also failed to report:
- $27,074 - the value of the Pontiac Aztec that he won in
2001 as part of his Survivor prize
- $326,540 that a radio station in Boston had paid him for appearances in 2001
- $28,104 in rental income earned in 2000 and 2001
- $36,500 donated to "Horizon Bound", a charity set up by Hatch...money that he supposedly used for his own personal expenses.
The Plea Bargain that Almost Was...
A 10-count indictment was handed down on September 8, 2005 which included charges for tax evasion as well as mail fraud, bank fraud and wire fraud.
If found guilty on all charges, he could have been sentenced to 13 years in prison and $600,000 in fines.
Hatch was offered a lenient sentence in exchange for a guilty plea, which he declined. He went on to state that he was basing his defense on the belief that NBC had agreed to pay his taxes on the winnings prior to giving him the money.
On January 25, 2006, he was found guilty of tax evasion for not paying the tax on the Survivor earnings, the income earned on the Boston radio show, and the rental property.
He was acquitted of the 7 counts of mail fraud, bank fraud and wire fraud.
On January 25, 2006 Richard Hatch was sentenced to 4 years and 3 months in Federal Prison, where he resides to this day.
A Study on What NOT To Do
Chances are good that you won't be winning a million dollars on a game show anytime soon.
But you may have found yourself in a situation where you're getting paid and the taxes are not being paid taken out by the person who pays you.
If so, you are expected to pay taxes on that income.
Remember - tax avoidance - if done correctly is perfectly legal. Although sometimes it takes a good accountant to keep on top of the all the tax laws that change from year- to-year, it's worth it to claim honest business expenses that are deductible.
However, Richard Hatch's case is totally different. It's apparent through his actions that Hatch had every intention of blatantly defrauding the government. The most damning evidence is that from the two accounting firms that presented the 'legal' versions of the tax returns that Hatch chose not to file.
Richard Hatch made the choice to do something illegal - and got caught...and he's now paying the price for his actions.
Have You Made Some Bad Choices?
Richard Hatch may have been able to avoid going to jail.
Even after filing a fraudulent return in 2001, he could have sought out a good tax attorney and admitted what he had done. A good tax attorney would have known the best route to make restitution with the IRS and keep Hatch out of jail.
Sure, he probably would have had to pay a lot of penalties and interest. He may have even lost most of his Survivor winnings paying back taxes, penalties and attorney's fees.
But he would still have his freedom.
If you've made some bad decisions - not filing, underreporting income, overstating deductions - whatever the case may be...it's not too late. The problem will only get worse if you don't take action and do nothing.