Beanie Babies Creator Gets Two Years Probation for Tax Evasion

If you were paying any attention in the 90’s – you are familiar with Beanie Babies. The Ty Warner Company (later Ty Inc.) launched the toy phenomenon in 1993, and by 1995 they became not only an in-demand toy, but also a collector’s item. The company was formed by H. Ty Warner, a businessman and former actor. Warner is back in the news, but this time for narrowly avoiding prison for tax evasion.

Warner was accused of hiding at one point more than $100 million dollars in Swiss accounts over the course of 11 years.   He had maintained a secret account at UBS since 1996, and once the U.S. started to request account information from this bank, he shifted his money to another bank and had even requested the destruction of some records, in accordance with the bank’s policies.   He was also charged with not reporting $24.4 million in gross income to the IRS from 1999-2007.

U.S. District Court Judge Charles Korocas decided to go against the prosecutor Michelle Petersen’s recommendation of a year in prison, citing Warner’s charitable history and was quoted to say that, “Society will be better served by allowing him to continue his good works.” Aside from detailing his charitable history, the defense stated that once he realized the U.S. was investigating UBS and the investors that he had done business with, he contacted his attorney. This is when he learned of the IRS offshore voluntary disclosure program. Warner applied with the IRS for the program in September of 2009; however, he was not accepted. He later learned that he was on the list of names that UBS turned over to the U.S. Justice Department in February of 2009 that precluded him from joining any offshore voluntary disclosure program.

Warner plead guilty to one count of tax evasion, and was sentenced to two years of probation, ordered to do 500 hours of community service at local Chicago high schools, pay $16 million in back taxes and over $53 million in Report of Foreign Bank Accounts (FBAR) penalties.

REMINDER!

With the 2013 filing season upon us, it is important to keep in mind that if you have a financial interest in an account or signature authority over at least one account that is maintained outside the U.S. with the aggregate value at any point in the year over $10,000, you will have a FBAR filing requirement. The Foreign Account Tax Compliance Act (FATCA) also requires the filing of additional forms if you have an interest in foreign assets, which differs from an interest in a bank account. Please consult your tax advisor as there are significant penalties for noncompliance.