(Bloomberg) H. Ty Warner, the creator of Beanie Babies plush toys, was charged with tax evasion for failing to report $3.2 million in income on a secret Swiss bank account that held as much as $93.6 million in assets, and will pay over $50 million in penalties for failing to file an FBAR.
Warner, 69, will plead guilty in federal court in Chicago for hiding income at UBS AG, the largest Swiss bank, U.S. Attorney Gary Shapiro said in a statement. Warner falsely reported his 2002 income as $49.1 million, omitting money he made on his UBS account. He amended his 2002 return in 2007, yet understated his tax by $885,300, according to court papers.
Since 2009, the U.S. has prosecuted about 70 U.S. taxpayers and 30 bankers, lawyers and advisers in a crackdown on offshore tax evasion. Warner, the sole owner of TY Inc., held the highest account balance of the taxpayers prosecuted in the crackdown.
“This is an unfortunate situation that Mr. Warner has been trying to resolve for several years now,” Gregory Scandaglia, Warner’s attorney, said in a statement. “Mr. Warner accepts full responsibility for his actions with this plea agreement.”
Warner, of Oak Brook, Illinois, also will pay a civil penalty of $53.6 million for failing to file a required Report of Foreign Bank and Financial Accounts, or FBAR, according to Scandaglia. He is scheduled to appear in court for his plea on Octocber 2, according to Shapiro’s spokesman Randall Samborn.
Through his Ty Warner Hotels & Resorts, he owns the Four Seasons Hotel New York, the San Ysidro Ranch in Santa Barbara, California, and Las Ventanas al Paraiso in Los Cabos, Mexico, according to the company’s Web site.
Warner opened a secret account at UBS in 1996. From there, he transferred $93.6 million in December 2002 to another secret Swiss account at Zurcher Kantonalbank, according to his criminal charging document known as an information.
He disguised his ownership of the ZKB account by holding it under an entity called the Molani Foundation, court papers show. In 2002, he failed to report his UBS income of $3.2 million to his outside accountants, and didn’t file an FBAR. The tax return he filed for 2002 also was false, according to the information.
In 2009, Warner tried to avoid prosecution through an amnesty program at the Internal Revenue Service known as the Offshore Voluntary Disclosure Program, according to Scandaglia. He was denied entry, the lawyer said.
Warner found Ty Inc. in 1985. It took off after he created the Beanie Baby, a children’s toy, in the 1990s. Ty Inc., based in Westmont, Ill., is a $4.5 billion business, according to his biography. Since 1995, he has donated almost $140 million in cash and plush toys to charities and organizations.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access