H. Ty Warner, the billionaire creator of Beanie Babies plush toys, should go to prison for tax evasion, U.S. prosecutors told a federal judge.
Warner, who pleaded guilty to a single count of tax evasion in October, is scheduled to be sentenced by U.S. District Judge Charles Kocoras in Chicago on Jan. 14. He failed to pay almost $5.6 million in taxes on undeclared income hidden in Swiss bank accounts. Over 11 years ending in 2008, the balance reached $107 million.
The toymaker’s lawyers, in a Dec. 31 filing, asked the judge for a sentence of probation and community service. Prosecutors said such a punishment would fuel public perceptions that wealthy people could avoid incarceration “simply by writing a large check.”
“This is a crime committed not out of necessity, but greed,” Chicago U.S. Attorney Zachary Fardon’s office said in a court filing today. “The government recommends a sentence which includes a term of imprisonment.”
In pleading guilty, Warner, 69, acknowledged that from 1999 through 2007, he underreported his gross income by $24.4 million, in filings with the U.S. Internal Revenue Service.
The parties don’t dispute that advisory federal sentencing guidelines call for a prison term of 46 to 57 months for Warner, who is one of more than 100 people prosecuted in the past five years for hiding money in foreign bank accounts.
“This case concerns an isolated event in Ty’s otherwise law-abiding life, during which he has paid approximately $1 billion in taxes,” according the billionaire’s Dec. 31 submission. “There is no reason to believe prison time is necessary to prevent him from engaging in tax evasion again.”
Warner’s lawyers also argued for leniency by citing his rejection from an IRS amnesty program that allowed more than 38,000 Americans with offshore accounts to avoid prosecution.
By the time Warner sought entry to that program, the government already knew of his conduct, Fardon’s office said today.
Warner made no attempt to report untaxed income or funds, held first at UBS AG and later transferred to the Zuercher Kantonalbank, until 2009 after he learned that UBS was going to disclose client records and that his asset manager, Hansruedi Schumacher, had been indicted, prosecutors said in today’s filing.
Schumacher is a fugitive, according to the U.S.
“Warner deserves little credit for admitting what he knows the government already had largely determined,” prosecutors said today. “Warner is telling the court what he thinks he needs to say in order to appear to the court to be open, honest and ashamed.”
Peter Troost, owner of a suburban Chicago grave marker business, last year received a sentence of one year and one day from another Chicago federal judge, after having admitting he used a Swiss bank account to evade more than $1 million in taxes.
The case is U.S. v. Warner, 13-cr-00731, U.S. District Court, Northern District of Illinois (Chicago).