Judi Rodrigues Wallis says she prepared a comparative tax return, per Richard Hatch's request, that didn't include his earnings from the Survivor TV show -- and told him not to file it.

01:00 AM EST on Thursday, January 19, 2006

BY RICHARD SALIT
Journal Staff Writer

PROVIDENCE -- Richard Hatch wanted to know: What would his 2000 taxes look like if he hadn't won $1 million on Survivor?

So the reality-show star from Newport asked Judi Rodrigues Wallis, his Middletown accountant, to take the 2000 return she had prepared for him, revise it and show him, she testified in U.S. District Court yesterday.

"It was just for analysis," said Wallis, a key witness for the prosecution in Hatch's federal tax evasion trial. She said she took her name off the sample return and had Hatch sign a letter from her stating, "This return is not intended to be filed and is simply for your information."

Months later, she learned from Hatch that he had filed that comparison return. It resulted in him claiming a refund of $4,483 instead of the $234,800 she had determined he owed. And it prompted an audit notice from the IRS.

Assistant U.S. Attorney Lee Vilker asked Wallis if Hatch told her why he filed the sample return.

"He felt that he needed to file something," she recalled. "I was surprised."

"Were you angry?" asked Vilker.

"I was too stunned to be angry at that point," said Wallis.

Wallis said that she had prepared the original return months earlier, assuming Hatch had sent it to the IRS. She learned later that not only did he not file it, but that before coming to her, Hatch had another accountant prepare a 2000 return for him, which he also never filed. She testified about that Tuesday, after the first accountant, Richard Plotkin, told the jury that Hatch did not file the return he prepared for him. That return indicated that the Survivor star owed the IRS $374,000.

Michael Minns, Hatch's lawyer, sought to discredit Wallis during his cross-examination. He suggested that because of her role in creating the return that was sent to the IRS -- the one that didn't include the Survivor winnings -- she was working closely with the U.S. Attorney's office.

"You've entered into a written agreement with the federal government for your protection, right?" Minns asked. Wallis answered yes, explaining that a lawyer she retained had advised her to seek such an agreement. Minns said, "You want them to be happy with the answers to the questions you are asked today?"

Wallis said she was simply giving factual answers.

Minns challenged her experience, getting her to acknowledge that she had never before prepared a return for someone with significant entertainment income and had handled only half a dozen returns for the type of corporation Hatch established to receive some payments. Under Minns' questioning, Wallis said that she worked out of an office in her house and that the client to whom she devoted most of her time was her father's auto body business. But she also testified that she had done corporate tax work before starting her own practice.

Wallis said she learned that Hatch never filed the original 2000 return she prepared for him when he told her months later about a notice he received from the IRS. The correspondence indicated the IRS had no return on file from him for 2000. Wallis said that Hatch explained to her that he hadn't filed the return because he was trying to raise the money to pay his taxes. He "indicated to me he was trying to sell his primary residence," she said.

Wallis advised Hatch to immediately file the original return and to pay whatever money he could to stop the penalties and interest from increasing. She also asked Hatch about income the notice claimed that he had earned in 2000. It didn't include the Survivor winnings, but it did list $135,000 in income that Hatch never told her about.

"He was uncertain as to the source of the income," said Wallis.

But Plotkin testified Tuesday that Hatch had presented him with numerous tax forms indicating other income. Prosecutors allege that Hatch did not furnish Wallis with the same income information that he provided to Plotkin.

Wallis suggested that after Hatch filed the original return, she would prepare an amended return showing the additional $135,000 in income and its tax consequences. Hatch, she recalled, said the fact that the IRS didn't list the Survivor winnings on the notice was possible "proof that CBS paid the taxes."

"I told him it did need to be included on the tax return," she said.

At that point, Hatch asked her if she could determine what his tax obligation would have have been without the Survivor earnings, including deductions he would have been allowed to claim if he had earned less money. When he asked for it in the form of a return, she considered it a reasonable request because the two could be compared side by side.

But, she said, "I told him I could potentially lose my license if he filed that return."

Minns also challenged Wallis on why she never asked CBS or Survivor's production company about Hatch's tax obligations from his TV show winnings.

"Even though you didn't have a clue, you said he should include it as income," he said.

rsalit@projo.com / (401) 277-7467