Digital Chocolate's Trip Hawkins could face $20+ million tax bill

Judge casts doubt over previous bankruptcy claims

Digital Chocolate's Trip Hawkins could face $20+ million tax bill
| Digital Chocolate news

Digital Chocolate CEO and founder Trip Hawkins could have to pay back more than $20 million in US taxes after a judge threw out his personal bankruptcy gained in 2006 as a measure to cancel the debt.

As reported by Forbes, district court judge Jeffrey S White said, despite knowledge of his tax liabilities, Hawkins had "continued to spend money extravagantly," because he wanted to carry on "living the lifestyle to which he had grown accustomed".

Money matters

Hawkins and his wife filed for Chapter 11 bankruptcy in 2006, listing assets of $5 million and liabilities of $28 million, the majority owed in tax to the state of California and the US IRS.

However, evidence produced in court suggests Hawkins, who founded Electronic Arts and was also behind the 3DO console, had spent $70,000 on a fourth car in 2004 – one of many purchases Hawkins is reported to have made despite acknowledging his financial situation.

It's claimed, Hawkins' monthly expenses averaged $94,900 in the year before his bankruptcy.

Lots of losses

Both Hawkins and his wife initially received a general discharge of their debts in 2006, but the case was then disputed.

It's suggested that as with other entrepreneurs, Hawkins had been advised to use certain accounting procedures involving offshore companies by his accountants at KPMG to create very large losses.

Hawkins claimed $56 million in capital losses between 1996 and 2000, generated through the sales of EA stock. The IRS challenged the tax shelter scheme in 2001, which started the current legal process.

The IRS also rejected an offer to settle the case for $8 million in 2006.

[source: Forbes]

Keith Andrew
Keith Andrew
With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font. He's also Pocket Gamer's resident football gaming expert and, thanks to his work on, monitors the market share of all mobile OSes on a daily basis.