Beanie Babies billionaire secretly withheld bank records from grand jury

In rejected Supreme Court appeal, Forbes 400 member argued subpoena violated his Fifth Amendment right to avoid self-incrimination

Photo via Flickr

Before Beanie Baby creator Ty Warner got away with community service for evading taxes on $25 million of from Swiss bank accounts, his lawyers claimed that he had tried to “rectify his mistake” by applying to the Internal Revenue Service’s voluntary disclosure program in 2009.

Later, Warner fought handing over records of his foreign bank accounts to a grand jury in a battle that made its way up to the U.S. Supreme Court. Last May, the court declined to hear Warner’s anonymous appeal in a case captioned T.W. v. United States of America. In September 2013, in a deal with the U.S. Attorney, Warner pleaded guilty to one felony count of tax evasion and agreed to pay a $53 million fine for failing to file required Foreign Bank Account Reports (FBARs). However, according to the U.S. Sentencing Commission Guidelines, Warner should have been sentenced to 46 to 57 months of jail time, which he was then given.

“I apologize for my conduct,” the 69-year old Warner said in the U.S. District Court in Chicago. “I made a mistake. I'm fully responsible.”

U.S.  Attorney Zachary Fardon is seeking approval to appeal Warner’s no-jail sentence.  In their original sentencing memo calling for him to do time, prosecutors didn’t mention the documents fight, but did argue that Warner’s  efforts to date fall well short of the kind of disclosure that meaningfully mitigates the seriousness of his offense.  Prosecutors said that Warner has never revealed the source of the funds he put in UBS in 1996. The memo also contrasted Warner’s conduct with that of Mary Estelle Curran, an 80-year-old Palm Beach Florida widow who, one month after being turned down for the same criminal amnesty program, filed amended returns and paid all outstanding tax due on $40 million in offshore accounts she had inherited from her husband.  

Since 2009, approximately  40,000 U.S. taxpayers have entered the IRS Offshore Voluntary Disclosure Program, which allows those with secret accounts to escape criminal prosecution in return for the payment of stiff penalties owed, as well as disclosure of the source of money in their secret accounts. Under IRS policy a taxpayer isn’t eligible for amnesty, if the IRS or DOJ  is already investigating him or has his name. Curran’s name was one of 285 that UBS turned over to the U.S. on Feb. 19, 2009, in a deal to avoid its own criminal prosecution.

According to Warner’s attorneys, he didn’t know investigators already had his name when he applied for amnesty in 2009. And, prosecutors argue that Warner should get no extra consideration for attempting to enter the program, since by the time he applied, he was “aware that disclosure of his account was probable.” That’s because his Swiss UBS banker turned independent asset manager, Hansreudi Schumacher, had been indicted and another Schumacher client, toy manufacturer Jeffrey Chernick, had pleaded guilty to hiding $8 million.

“The Solicitor General’s office is going to have to balance the need to try to overturn a decision that it believes sends the wrong message for people committing tax crimes against the potential downside for having a circuit (appeals) court affirm that sentence,’’ said Nathan J. Hochman, a former Assistant Attorney General for the Tax Division who argued three losing tax sentence appeals for the government.

 

For more on tax law news, check out these articles:

The finish line is distant for the Bahamas compliance with U.S. FATCA

Beanie Babies boss pleads guilty to tax evasion

Lower taxes + less regulation = a prosperous economy, says study

Italy passes ‘Google tax’ for Internet advertisers

Contributing Author

Amanda Ciccatelli

Amanda G. Ciccatelli is a Contributing Writer for InsideCounsel, where she covers the patent litigation space. Amanda earned a B.A. in Communications and Journalism from...

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.