Beanie Babies founder Ty Warner sentenced to probation for tax evasion

Beanie Babies founder Ty Warner was sentenced to probation for tax fraud.
January 13, 2014 10:00:00 PM PST
Beanie Babies creator H. Ty Warner went before a federal judge and learned he won't have to spend time behind bars for evading taxes.

Warner was sentenced to two years of probation, which includes 500 hours of community service.

On Tuesday night, a self-proclaimed school of second chances is preparing to offer one to tax evader Ty Warner. Leo Catholic High School was chosen by the judge after the school's president wrote this letter to Warner's attorney, saying the students at Leo ? some of whom have their own criminal pasts ? could draw lessons from Warner's experiences.

"I'm sure he won't be the first felon who walks through our doors, and I don't make light of that. But I do think he deserves another chance. He certainly seemed remorseful for what he did," said Dan McGrath, president, Leo High School.

Leo Catholic is one of three South Side high schools where the billionaire founder of Beanie Babies may soon be a guest lecturer.

Eyewitness News Reporter Eric Horng: "Any concern about having a convicted felon in the school?"
McGrath: "He's not a murderer. He's not a drug dealer. His record for philanthropy, as the judge pointed out, is really remarkable. He's been a very generous guy."

Exactly when Warner will begin his community service has yet to be determined.

The judge said that it was the 70 letters written on Ty Warner's behalf, many written by perfect strangers, that convinced him that society would be better off by allowing him to remain free and continue doing his charitable work. Warner pleaded guilty in October to not paying taxes on $25 million for a period of 11 years. Since then, he has paid all the back taxes as well as a $53 million penalty.

Reacting to the verdict, prosecutors say they're disappointed but insist they will continue to prosecute cases of people trying to hide their assets in foreign bank accounts and say they do not believe this case sends the wrong message that the wealthy can get off for tax evasion without consequence.

"We are very humbled and grateful by the judge's decision," said Greg Scandaglia, Warner's attorney.

"It is the judge's purview to impose a sentence, and he reached his judgment, and we respect his judgment," said U.S. Attorney Zach Fardon. "We did our job, and I'm proud of the job we did, we would do the same thing today we did yesterday, going after this kind of offender under these circumstances."

Warner's sentencing gave him a chance to apologize at length for hiding millions in Swiss bank accounts. The 69-year-old apologized and wiped away tears when he pleaded guilty last year. At that time, the judge in Chicago stopped him from apologizing and said Warner could explain himself fully at sentencing.

Defense attorneys argued for probation, pointing to Warner's unhappy childhood and his charity work.

Warren could have been sentenced to up to five years in prison. U.S. District Judge Charles Kocoras spent most of the 20 minutes explaining his sentence praising the businessman's charitable work. He cited a $20,000 medical bill Warner paid for a stranger with a kidney ailment and Warner's $20 million charitable donation of proceeds from a toy he helped design commemorating Princess Diana after her death.

"I find Mr. Warner to be a very unique individual ... in his service and kindness to mankind," Kocoras said in explaining his decision to forgo prison time. "Society will be better served by allowing him to continue his good works," he said, noting that Warner had already paid a price in "public humiliation" and "private torment."

Prosecutor Michelle Petersen told the judge that Warner's charity - however laudable - should not keep him out of prison.

"(Without prison time), tax evasion becomes little more than a bad investment," she told Kocoras. "The perception cannot be that a wealthy felon can just write a check and not face further punishment."

Beanie Babies first appeared in the mid-1990s, triggering a craze that generated hundreds of millions of dollars for Westmont, Ill.-based TY Inc., of which Warner is the sole owner. Forbes recently put his net worth at $2.6 billion.

The small, plush toys have heart-shaped name tags and are made to resemble bears and other animals. Some are designed to look like cartoon or comic book characters. As collectibles, some fetch thousands of dollars.

Warner maintained a secret offshore account starting in 1996 with the Switzerland-based financial services company UBS. He earned $3.1 million in gross income in 2002 through the account, but didn't report it, prosecutors say.

The Associated Press contributed to this report.