First, the tax man got Al Capone — and now, the man who brought the world Beanie Babies.
In a bid to avoid wearing prison stripes the rest of his life, H. Ty Warner, the founder of the self-named company that created the ’90s sensation — essentially bean bags shaped as . . . everything — has reached an agreement with federal authorities in Illinois to plead guilty to tax evasion and pay an astounding $53.5 million in penalties.
Warner, who lives in suburban Chicago, agreed to pay the fine after being accused of federal tax evasion for failing to report income he earned in a secret offshore bank account, his attorney and prosecutors said Wednesday. The fine is one of the largest offshore-account penalties ever imposed.
As prosecutors in Chicago announced the charge against Warner, his defense lawyer issued a statement saying the 69-year-old billionaire intended to plead guilty and pay the massive penalty.
Warner, who 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 a heart-shaped name tags from Westmont, Ill.-based company.
Court documents allege that, starting in 1996, Warner maintained a secret offshore account 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. A news release from the US Attorney’s Office in Chicago did not mention a $53 million penalty. He described the fine as “a civil penalty . . . for failure to file a Foreign Bank Account Report.”
Warner would appear to be in a position to 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 Shapiro, the acting US attorney in Chicago, said in a statement Wednesday. “Such conduct invites federal prosecution.”