Beanie Babies
Dominique Godbout/CC-BY-2.0

Beanie Babies Creator Won’t Do Time for Tax Evasion

Jul 30th 2015
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The billionaire creator of the Beanie Babies toy empire is getting a mere slap on the wrist for failing to report more than $24 million in taxable income he stashed away in two Swiss bank accounts.

A three-judge panel for the 7th US Circuit Court of Appeals in Chicago sentenced H. Ty Warner on July 10 to just two years of probation.

Warner was also ordered to pay $80 million in back taxes and penalties, but he is avoiding jail time. Normally, sentencing for crimes of this nature would call for a stretch in prison of between 46 and 57 months. However, the court cited Warner's overwhelming history of good deeds as the reason for the leniency.

The panel, which affirmed a January 2014 ruling by US District Court Judge Charles Kocoras, squarely addressed the elephant in the room.

“A nonwealthy defendant who showed similar qualities would be entitled to similar treatment (all else being equal),” wrote Judge Michael Kanne. “And a rich defendant who gave large gifts without real concern for others, or who did so cynically to give himself an argument at sentencing, would not deserve the same leniency.”

Kanne noted that Warner had already paid a $53.6 million penalty on top of full restitution. His payments came to almost 10 times the actual tax loss.

Warner's meteoric rise in the plush toy industry is a true American rags-to-riches story. After dropping out of college and working a number of jobs – including busboy, bellman, valet, fruit market vendor, and door-to-door encyclopedia salesman – he eventually founded his own toy company. The flagship product was the Beanie Baby, a plush toy filled with plastic pellets that became an iconic collectible.

Despite his enormous wealth and success, Warner is said to be financially naïve and almost generous to a fault. He reportedly gave away $140 million in cash and toys to such organizations as the Children's Hunger Fund and the Princess Diana Memorial Fund. In addition, many of his charitable gifts were made anonymously or without any public fanfare.

Warner admitted to opening an account at UBS in 1996 and transferring $93.6 million in 2002 to Zuercher Kantonalbank, a small Swiss bank. He submitted a false return in 2002 while omitting his UBS income of $3.2 million and failing to file the required Report of Foreign Bank and Financial Accounts (FBAR).

After amending his 2002 return in 2007, he still understated his tax liability by $885,300. Warner also acknowledged underreporting his gross income by $24.4 million from 1999 through 2007. He applied for the IRS Offshore Voluntary Disclosure Program in 2009, but was turned down.

The government sought to send a sterner message to tax evaders, but the court was swayed by Warner's benevolent character. Numerous supporters had come forth on his behalf, citing a multitude of acts of kindness.

“Never have I had a defendant in any case – white-collar crime or otherwise – demonstrate the level of humanity and concern for the welfare of others as has Mr. Warner,”Kocoras said last year.

Apparently, it was enough to keep him out of jail.

Related article:

Tax-Evading Toymaker Gets Slap on the Wrist


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