CHICAGO (AP) — The billionaire businessman behind Beanie
Babies learned Tuesday that he won’t go to prison for hiding at least
$25 million from U.S. tax authorities, and the judge who gave him two
years’ probation instead went to great lengths to praise his charitable
giving.
H. Ty Warner, one of the highest profile figures snared in
a federal investigation of Americans using Swiss bank accounts to avoid
U.S. taxes, issued a brief apology before he was sentenced in Chicago
federal court. The toymaker, who pleaded guilty to a single count of tax
evasion, said he felt "shame and embarrassment" for what he had done.
Warner,
69, could have been sentenced to up to five years in prison, and a
prosecutor Michelle Petersen asked U.S. District Judge Charles Kocoras
to give Warner at least a year behind bars.
Peterson detailed how
Warner meticulously hid his income — more than $100 million at one point
— by filing false tax returns for at least 11 years, and pointed out
that another area businessman caught in the same dragnet, Peter Troost,
got a year in prison from another judge in that courthouse for hiding
far less — $3 million.
"(Without prison time), tax evasion becomes
little more than a bad investment," Petersen told the judge. "The
perception cannot be that a wealthy felon can just write a check and not
face further punishment."
Kocoras, though, opted against prison
time, and he devoted most of the 20 minutes he spent explaining his
sentence praising Warner’s charitable work.
"Society will be
better served by allowing him to continue his good works," he said,
adding that he believed the Oak Brook toymaker had already paid a price
in "public humiliation" and "private torment."
Warner, who grew up
poor and had an unhappy childhood, according to his attorneys, created
Beanie Babies in the mid-1990s. The small, plush toys resembling bears
and other animals triggered a craze that generated hundreds of millions
of dollars for his Westmont-based TY Inc. Forbes recently put his net
worth at $2.6 billion.
Warner maintained a secret offshore account
starting in 1996 with the Switzerland-based financial services company
UBS — shifting millions to another foreign bank when U.S. authorities
began closely scrutinizing UBS. He even instructed the bank, under its
rules, to destroy some records, Petersen said.
But Kocoras said that, in Warner’s case, his "endless acts of kindness" deserved to
"trump" his criminal behavior.
The
judge recalled how Warner, after getting lost driving in Santa Barbara,
Calif., pulled over to a parking lot fundraiser and told a woman with a
kidney ailment that he would pay her $20,000 medical bill. He also
mentioned Warner’s $20 million charitable donation from proceeds from a
toy he helped design commemorating Princess Diana after her death.
As
part of his sentence, Kocoras also ordered Warner to do 500 hours of
community service at local Chicago high schools. When he pleaded guilty,
Warner agreed to pay $27 million in back taxes and interest, and a
civil penalty of more than $53 million — one of the largest such
penalties ever paid.
After the hearing, the U.S. attorney for
Chicago, Zachary Fardon, said the sentence "is less than we asked for
but is not nothing." He cited, among other things, the fines, community
service and "the abject humiliation" of facing federal prosecution.
"I think that’s the message folks should receive — that (tax evasion) is a crime that does not
pay," he said.
Just
before Tuesday’s hearing adjourned, Kocoras said that as a formality,
he needed to advise Warner that he had the right to appeal his sentence.
The judge then laughed, adding, "if you think you can get a better deal
in the court of appeals."
___
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