CHICAGO – The creator of Beanie Babies stuffed animals was charged Wednesday with federal tax evasion for failing to report income earned in a secret offshore bank account, and he has agreed to pay a more than $53 million penalty.
As prosecutors in Chicago announced the charge against H. Ty Warner, his defence lawyer issued a statement saying the 69-year-old billionaire intended to plead guilty and pay the massive penalty.
Warner, who lives in suburban Chicago and is the sole owner of TY Inc., still faces the prospect of time behind bars. A conviction on a federal tax evasion charge carries a maximum five-year prison sentence.
Beanie Babies started appearing in the mid-1990s, triggering a craze that made the company hundreds of millions of dollars. The small, plush dolls come in various animal forms and heart-shaped name tags from Westmont, Ill.-based company.
Court documents allege that Warner maintained a secret offshore account starting in 1996 with the Switzerland-based financial services company, UBS.
His defence attorney, Gregory Scandaglia, said that Warner accepts full responsibility.
“This is an unfortunate situation that Mr. Warner has been trying to resolve for several years now,” Scandaglia said.
A news release from the U.S. Attorney’s Office in Chicago did not mention a $53 million penalty. Scandaglia described it as “a civil penalty … for failure to file a Foreign Bank Account Report.”
Warner would appear to be in a position pay the massive penalty. Forbes estimates his net worth at $2.6 billion and puts him 209th on the list of the top 400 wealthiest Americans.
According to prosecutors, he earned $3.1 million in gross income in 2002 through investments held in the UBS account. He allegedly committed tax evasion by failing to inform his accountants about that income. By leaving out his UBS income, he falsely reported that his total income in 2002 was $49 million, prosecutors say.
“Regardless of wealth, everyone must pay taxes on all of their income, not just the amount they choose to report,” Gary S. Shapiro, the acting U.S. attorney in Chicago, said in a Wednesday statement. “Such conduct invites federal prosecution.”
A date for Warner’s arraignment hasn’t been set.