As we reported in our 2013 review of offshore tax evasion developments, H. Ty Warner, creator of Beanie Babies, opened a secret account at UBS AG in 1999. According to prosecutors, Warner failed to include income from his Swiss account on his 2002 tax return. He also failed to file a Report of Foreign Bank and Financial Accounts (FBAR).
In September 2013 he pleaded guilty to tax evasion and agreed to pay $53.6 million in fines and $27 million in back taxes. In January 2014, Warner avoided jail time and was sentenced to 2 years probation and community service. This seemed to be a very lenient sentence considering Warner has held the highest account balance of any taxpayer prosecuted by the government to date.
In his defense, Warner cited that he tried to enter the Offshore Voluntary Disclosure Program (OVDP) in 2009 but was denied entry by the IRS. What was not made public until recently is the Warner went all the way to the Supreme Court to appeal handing over his bank records to a grand jury.
Janet Novak details in her Forbes article, “Beanie Babies Billionaire Ty Warner Secretly Fought Giving Bank Records To Grand Jury,” Warren’s secret appeal to the Supreme Court. Would this information have made a difference in his sentencing? The U.S. Attorney for Northern Illinois Zachary T. Fardon seems to think so. He is now seeking Department of Justice approval to appeal Warner’s no-jail sentence. This is an unusual move that first must be approved by the U.S. Solicitor General. If approved, the odds of prevailing in a sentencing guidelines appeal are not in the government’s favor.