Babies creator gets probation for tax evasion
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[January 15, 2014]
By Mary Wisniewski
CHICAGO (Reuters) — The billionaire
creator of Beanie Babies, Ty Warner, will serve two years of probation,
including mentoring high school students, following his guilty plea on a
tax evasion charge, but no jail time, a federal judge ruled on Tuesday.
Warner, 69, who pleaded guilty in October, told U.S. District
Court Judge Charles Kocoras in Chicago that his crime was the
"biggest mistake" of his life. Warner already had agreed to pay a
civil penalty of nearly $53.6 million.
Ranked as the 209th richest American by Forbes with a listed net
worth of $2.6 billion in 2013, Warner failed to report more than
$24.4 million in income and evaded nearly $5.6 million in federal
taxes from millions hidden in Swiss bank accounts, according to
Prosecutors had argued that Warner should serve time in jail given
the extent of the coverup, and federal guidelines called for up to
five years in prison.
"I am truly sorry," said the slightly-built Warner, who wore
headphones to compensate for hearing loss. He told Kocoras the
letters of support he received "made my feelings of shame and
embarrassment that much more unbearable."
Kocoras cited Warner's many acts of charity before imposing
probation rather than prison. Kocoras said he had reviewed letters
from people helped by the billionaire, including a woman with a
kidney disease Warner had stopped to ask for directions. After
learning of her condition, Warner paid for her treatment.
"Society will be best served by allowing him to continue his good
works," Kocoras said.
Warner was sentenced to at least 500 hours of community service,
which will include mentoring students at Leo High School, a Catholic
boys' school in a poor, mostly African-American neighborhood in
Before sentence was imposed, Assistant U.S. Attorney Michelle
Petersen questioned what kind of message probation would send to
"The consequences cannot be simply to pay what you owe," Petersen
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In seeking probation, defense attorneys said in a court document
that Warner was a college drop-out from an unhappy family who became
a "self-made American success story" and others in similar tax
circumstances had not gone to prison.
Beanie Babies, small plush toys sold for $5 to $7, have been popular
with collectors. At their peak of popularity in the 1990s, some
collectors paid hundreds of dollars for a rare character on the
resale market, according to press accounts.
Warner was charged as part of an ongoing investigation of U.S.
taxpayer clients of Union Bank of Switzerland and other overseas
banks that hid foreign accounts from the IRS, according to
prosecutors. UBS agreed in 2009 as part of a deferred prosecution
program to provide the U.S. government with the identities of
certain customers, prosecutors said.
The federal charge to which Warner pled guilty alleged that, in
2002, Warner earned more than $3.1 million through investments held
in his UBS account, but did not tell his accountants and failed to
report it on his tax form.
(Reporting by Mary Wisniewski; editing by Ken Wills and Gunna
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