When you're facing jail, blame everybody else.

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In recent years, this strategy has spread from street hoodlums to CEOs, such as WorldCom's Bernie Ebbers, just convicted for corporate fraud. Now it has found another adherent: Richard Hatch, the winner of the first edition of Survivor and a participant in Survivor: All-Stars, who is blaming CBS for his failure to pay his income taxes on his winnings from the show.

Last Friday, Hatch appeared on NBC's Today Show to defend himself against tax-evasion charges related to his $1,010,000 payoff from Survivor: Pulau Tiga. According to the Providence Journal, Hatch said, "I've always paid my taxes, and I'm always happy to pay my taxes. But I believed the taxes on that particular amount were going to be paid either by CBS or withheld by them."

Today Show host Katie Couric, known for not challenging the assertions of celebrities on her show, failed to ask Hatch whether his belief that CBS would pay his taxes extended to the $321,139 that Hatch also failed to pay taxes on during his stint as a radio talk-show co-host for Entercom Broadcasting in Boston in 2001.

In January, Hatch and his previous lawyer had signed a seven-page plea agreement, under which Hatch would plead guilty to two counts of willfully filing a false tax return, in 2000 and 2001. Each count carries a maximum penalty of 5 years in prison and a $100,000 fine (according to 26 USC section 7201, although the plea agreement states that the fine is $250,000 per count). Based on U.S. sentencing guidelines, Hatch's "normal" sentence of imprisonment would be 27-33 months on each count, although the plea agreement provides that the government would recommend a reduction in sentence in return for Hatch's guilty plea.

However, Hatch, who subsequently withdrew from the agreement, told Couric that "I never made a plea agreement" -- despite his signature on a legal document clearly titled "Plea Agreement." Apparently Richard's frequent and false statements during the first Survivor that there was no "Tagi Alliance" were in character.

Also appearing with Richard was his new lawyer, Michael Minns, who claimed that Richard was a statutory employee of CBS. Minns stated that the contract between Richard Hatch and Survivor stated that Richard would receive his winnings "less all applicable withholdings, deductions and taxes."

Minns interpreted this clause to mean that "CBS is telling Richard... that they're going to take the withholding out as you do with any employee." However, a tax CPA, who requested to remain nameless, told Reality TV World that this clause simply means that, if any withholding is found to apply to the winnings, then CBS will deduct it; the clause does not say or imply that CBS has concluded that any withholding is necessary or appropriate.

Minns, who became famous when two IRS lawyers committed gross misconduct in a case against about 1500 people (of whom he represented about 10%) that had engaged in an improper tax shelter, also stated that the rules of Survivor meant that CBS "own[ed] people for 42 days" and so the contestants should be viewed as CBS employees, not as competitors for a prize.

Even if this novel employment argument were upheld by a court, it would not eliminate Richard Hatch's liability for his unpaid taxes. Instead, it would merely permit the IRS to go after CBS in addition to Hatch for the unpaid amount. So why would Hatch and his attorney make this argument?

Two reasons, said the CPA. "First and most importantly, the criminal statute under which Richard Hatch has been charged requires a person to 'willfully attempt' to evade taxes. A taxpayer can defeat this charge if he believed in good faith that he didn't owe any taxes, which means that he was not 'willful.' If Richard can establish that he truly held the belief that CBS had paid his taxes, then he would not be guilty of this crime and would avoid going to prison.

"It may seem difficult for Richard to establish this belief, especially since the tax forms that he received from CBS would clearly show that no taxes had been withheld or paid to the government by CBS. But there is a 1989 court case in which a tax protester claimed that he believed in good faith that income taxes were illegally collected from individuals through threats and coercion by 'Satan's little helpers,' and so he had not willfully failed to file. A federal appeals court ruled that his belief didn't have to be rational to be held in good faith, and so he would be permitted to try to establish that he truly held this belief in good faith."

"Since that time, the IRS has had a major problem with tax protesters who make such frivolous arguments to avoid paying taxes and then claim that they acted in good faith. The IRS has pursued criminal charges against many of these protesters and has almost always won convictions."

"Although Richard Hatch is making a different argument, it seems probable that the U.S. government also will take him to trial on tax-evasion charges. The case may turn on whether Richard really believed in good faith that CBS had paid his taxes, which in turn will depend on the actual facts and circumstances of Richard's situation."

"However, his late filing of his tax returns and his failure to pay the taxes from his radio job tend to work against him. Without knowing any of the other facts, those two items make him look more like a generic tax protester and less like someone who really thought that he was a CBS employee."

"The other reason for claiming CBS employment would be that it would force CBS to pay Richard's Medicare tax and part of his FICA tax. Those two items are trivial, though, by comparison with avoiding prison," concluded the CPA.

Richard also told AP Radio (according to the Associated Press) that, "I'm being used as an example, as a scapegoat. And I'm innocent. This is nothing more than their effort to use my notoriety to get other people to pay taxes."

Richard may be right. However, other famous people have made that argument, ranging from Leona Helmsley to Martha Stewart, and their cases have generally ended up with the same result: conviction.

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