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THIS WEEK IN TAX CRIME

January 13, 2006

Because inquiring minds want to know:

RICHARD HATCH, the nude "Survivor," went on trial this week for evading taxes on, among other things, the $1 million he won in the initial "Survivor" TV series. He is using an unusual twist on the old "blame the accountant" defense:

Reality show star Richard Hatch is merely the ''world's worst bookkeeper," not the tax evader that prosecutors make him out to be, his attorney said yesterday as the ''Survivor" winner's tax fraud trial got underway in Providence.

Really, though, it's a twist on the Steve Martin "I forgot about the million dollars" defense. Presumably his next move will be to say, "Excuuuuuse Me!"

EXTREME TAX PLANNING

Perhaps this is all just some sort of misunderstanding?

A Chicago lawyer disbarred for overbilling state child-welfare officials evaded more than $640,000 in federal taxes, partly by moving $2.6 million in assets to a Swiss bank account, according to a federal indictment made public Thursday.

Joyce F. Britton, 55, failed to file tax returns for 2001 and 2002 despite receiving more than $2.2 million in legal fees from the Department of Children and Family Services during those years, according to the indictment.

If she gets caught, she'd better have a heck of an alibi. "I was... I was... helping to finance democracy in Switzerland!"

MEANWHILE IN WEST VIRGINIA...

...an accountant goes bad.

Carl Lemley Kennedy II, 48, is scheduled to report to the federal penitentiary next month to begin serving almost 3 1/2 years.

In sentencing Kennedy, U.S. District Judge John Copenhaver Jr. noted that the accountant stole more than $1 million from employees’ withholdings, apparently investing the money in other businesses and property, and still owes the Internal Revenue Service $500,000 in personal income taxes.

The Charleston Gazette focuses lovingly on the toys bought with the ill-gotten gains:

With his 2003 Hummer H2 already sold off, Kennedy faces potential liquidation of his other property and assets. Already he sold his half-interest in a Surfside, S.C., beach house that was valued at $120,000 to a former wife...

Kennedy, who also owes more than $200,000 in West Virginia income taxes, also stands to lose his 1979 MGB, 1977 Harley-Davidson Superglider, 1976 Volkswagen Beetle convertible and his 1981 Piper Warrior II airplane.

The government will also probably offer his other property for sale at some point, including 112-120 D St. in South Charleston, 1107 and 1109 Main St. in Charleston and three, 2-acre lots in the Bahamas.

The Moral? Don't be a crook, or they take away your toys.

KPMG DEFENDANTS FILE MOTIONS TO DISMISS CHARGES

It looks like the defendants in the KPMG tax shelter case aren't going to go away without a fight. The New York Times reports:

Former KPMG tax professionals who are facing criminal charges over questionable tax shelters challenged the government yesterday to prove that they had broken the law.

The defendants filed more than two dozen motions in United States District Court in Manhattan yesterday, asking among other things that charges be dropped because no court had ever ruled the shelters in question illegal.

This is shaping up as a monumental battle.

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