The creator of Beanie Babies stuffed animals has agreed to pay a $53 million penalty after being accused of federal tax evasion for failing to report millions in income that he earned through a secret offshore bank account, his attorney and prosecutors said.
As prosecutors in Chicago announced the charge against H. Ty Warner, his defense lawyer issued a statement Wednesday saying the 69-year-old billionaire intended to plead guilty and pay the massive penalty.
“We encourage taxpayers to think of the serious consequences, including possible criminal penalties, for willfully presenting false information on their federal tax returns,” James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago, said in a news release. “All taxpayers must honor their obligation to report all of their income and pay all of the taxes they owe.”
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 defense 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.
The news release from the U.S. Attorney's Office in Chicago did not mention a $53 million penalty, but Warner's attorney and prosecutors who spoke to the Associated Press did. 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.
The Associated Press contributed to this report.