Hatch, who was convicted in 2006 of failing to pay taxes on the $1 million prize he won on the debut season of the CBS reality series, spent more than three years in federal prison and was then placed on three years of supervised release. He was released in 2009 and has been living in Newport.
Federal authorities accuse him of violating the conditions of his release by failing to file amended tax returns for the years 2000 and 2001, as required by a judge at the time of his sentencing.
"I don't think the question of a violation in itself is really in any doubt," U.S. District Judge William Smith said, adding that Hatch appears to have a track record of mocking the court system and alleging unfair persecution.
He said he could put Hatch back behind bars for the remaining two years of his supervised release if he finds that Hatch willfully violated the terms of his freedom, as prosecutors allege. The judge ordered prosecutors and Hatch's lawyer to file new paperwork and said Hatch would be sentenced later.
The Internal Revenue Service says that as of last February, Hatch owed about $1.7 million in taxes for 2000 and 2001 - including interest and penalties. But Hatch has appealed that finding to the U.S. Tax Court, and his amended tax returns cannot be filed until after his appeal is concluded, argued Hatch's federal public defender, Mary McElroy.
"He has the right to go through that process. He's been cooperating with that process," she said.
But Assistant U.S. Attorney Andrew Reich argued that Hatch had an opportunity to refile his tax returns before he appealed to the U.S. Tax Court, and that his failure to do so was part of his overall resistance to complying with the law.
"Instead, Mr. Hatch took the view that he was going to continue to fight the IRS, that he was going to continue to raise the ridiculous arguments that he raised during the trial," Reich said.
Last April, the IRS also issued a so-called "jeopardy assessment" against Hatch, which is typically imposed when the agency suspects a person may be trying to hide certain assets to avoid paying taxes.
The IRS told him in a letter that it was concerned Hatch had transferred his interest in Newport properties, "for little or no consideration," and "may be attempting to liquidate your interest in these properties and conceal the proceeds from such liquidation" to hinder the collection of his income tax for the years 2000 and 2001.
That allegation was not addressed in detail during Monday's hearing.
Hatch said outside court that he was grateful the judge appeared willing to listen to his position and that the government had been "trying to paint me in a light that's not true."