The U.S. Justice Department is appealing the sentence of H. Ty Warner, the billionaire creator of Beanie Babies plush toys who got probation, not prison, for evading taxes on money hidden in a Swiss bank account.
Warner faced 46 to 57 months in prison under nonbinding guidelines when he was sentenced Jan. 14 by U.S. District Judge Charles Kocoras in Chicago. Prosecutors, who urged Kocoras to impose some prison time on Warner, today asked the U.S. Court of Appeals to review his sentence.
Kocoras sentenced Warner, the founder of toymaker Ty Inc. and Ty Warner Hotels & Resorts, to two years of probation and 500 hours of community service at three Chicago-area schools. Warner had pleaded guilty to evading almost $5.6 million in taxes on more than $24.4 million in undeclared income on accounts that held as much as $107 million.
Warner’s evasion was the largest of more than 100 cases brought in a five-year crackdown against taxpayers and enablers who used offshore accounts to cheat the Internal Revenue Service. Prosecutors are concerned that his sentence will affect others around the U.S., said Bryan Skarlatos, a tax attorney at Kostelanetz & Fink LLP in New York, who isn’t involved in the case.
“It’s a very large account and a high-profile defendant, and prosecutors are obviously disappointed that they couldn’t get a term of incarceration,” said Skarlatos. They fear “that other defendants at sentencing will cite the Ty Warner case in arguing that they shouldn’t go to prison,” he said.
Evaded Taxes
Warner’s attorney, Gregory Scandaglia, didn’t immediately return a call seeking comment on the appeal.
“We are working out the details of Mr. Warner’s community service,” Eric Herman, a spokesman for Warner, said in an e- mailed statement. “He’s looking forward to beginning his work there and expects to begin soon.”
Last year, Peter Troost, a maker of grave markers and monuments, was sentenced to a year and a day in prison by a judge in the same Chicago courthouse. Troost admitted to evading taxes on more than $3.3 million in income. At Warner’s sentencing, Assistant U.S. Attorney Michelle Petersen said that should be the baseline for the plush-toy tycoon’s punishment.
‘Bad Investment’