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January 3, 2014

Beanie Baby billionaire seeks to avoid jail for tax evasion

H. Ty Warner, the billionaire creator of Beanie Baby plush toys, asked a U.S. judge to give him probation, not prison, for evading taxes on secret Swiss accounts that held as much as $107 million.

Warner, 69, faces 46 months to 57 months in prison under nonbinding guidelines when he's sentenced Jan. 14 in Chicago. The maker of plush toys, who also runs hotels, wants U.S. District Judge Charles Kocoras to impose a term of probation with community service, according to a Dec. 31 court filing.

Warner is among more than 100 people prosecuted in the past five years during a U.S. crackdown on offshore tax evasion. His lawyers argued that "dozens of individuals who engaged in the exact same conduct with respect to undisclosed overseas accounts" got probation.

"This case concerns an isolated event in Ty's otherwise law-abiding life, during which he has paid approximately $1 billion in taxes," according to the filing. "There is no reason to believe prison time is necessary to prevent him from engaging in tax evasion again."

Warner owns TY Inc., which makes Beanie Babies, and Ty Warner Hotels & Resorts, the operator of the Four Seasons Hotel in New York and other facilities. He pleaded guilty Oct. 2 to evading $5.5 million in taxes on assets in Swiss accounts he hid from the Internal Revenue Service.

Under the federal guidelines, Kocoras can consider such factors as other sentences around the U.S., Warner's charitable gifts, and his pledge to pay penalties, back taxes and interest of more than $69 million. Warner also asked the judge to weigh that he was denied entry into an IRS amnesty program that has let more than 38,000 Americans with offshore accounts avoid prosecution.

Warner's name was on a list of account data for 285 Americans that his former bank, UBS AG, gave to the Justice Department in avoiding prosecution in February 2009. Zurich- based UBS, the biggest Swiss bank, also paid $780 million and admitted to fostering tax evasion. UBS later turned over 4,450 more names.

After Warner applied for the voluntary disclosure program in September 2009, the IRS rejected him because it wasn't available to those already known to the agency, according to the filing. A U.S. pre-sentence report cited by Warner's lawyers said the IRS had learned of his Swiss accounts "a few years before UBS turned over client account information" to the U.S.

"Ty's behavior was no different legally or factually from that of tens of thousands of taxpayers who were never sentenced - or even prosecuted - because they were admitted into IRS voluntary disclosure programs," according to the filing, known as a sentencing memorandum.

Warner's lawyers proposed that the judge impose "substantial community service," including work at the Ellen H. Richards Career Academy High School and the Edward Tilden Career Community Academy High School, both in Chicago.

The Justice Department hasn't filed its sentencing memo yet.



 

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