Beanie Baby billionaire avoids prison, gets 500 hours of community service
BY KIM JANSSEN Federal Courts Reporter January 14, 2014 11:29AM
H. Ty Warner, the billionaire who created Beanie Babies, arrives at federal court for sentencing on Tuesday, Jan. 14, 2014, in Chicago. Last year Warner pleaded guilty to one count of tax evasion for hiding $25 million in income in secret Swiss bank accounts. (AP Photo/Andrew A. Nelles)
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Updated: February 16, 2014 6:20AM
When a lost Ty Warner pulled over to ask a stranger for directions in a Santa Barbara parking lot in the summer of 2012, he ended up writing her a $20,000 check.
The Oak Brook Beanie Baby billionaire’s spur-of-the-moment donation to dialysis patient Jennifer Vasilakos “changed my life” by allowing her to get expensive stem-cell treatment for her kidney condition, Vasilakos would later write.
And on Tuesday, it helped change the 69-year-old plush toy magnate’s life, too.
Citing Warner’s generosity to Vasilakos and dozens of other beneficiaries of his $2.6 billion self-made fortune, U.S. District Judge Charles Kocoras spared Warner from prison for illegally hiding more than $100 million from the Internal Revenue Service in a secret Swiss bank account.
Warner’s many charitable works were “motivated by the purest of intentions” and demonstrated a “depth of humanity” that he had never seen in any other criminal defendant, Kocoras said as he instead sentenced the convicted tax cheat to two years of probation and 500 hours of community service.
“Society will be best served by allowing him to continue to do his good works,” the judge said.
Though U.S. Attorney Zach Fardon later insisted the record $53 million fine and $27 million in back taxes and interest that Warner previously agreed to pay under a plea deal sent a message that the government would go after tax dodgers, however wealthy, the sentence was a slap in the face to prosecutors.
Assistant U.S. Attorney Michelle Petersen had urged Kocoras to lock Warner up for at least a year. That sentence was handed last year to Skokie businessman Peter Troost — a mere millionaire — for a far smaller-scale version of the same offense.
Anything less would encourage the idea among the rich that cheating on your taxes is “little more than a bad investment” Petersen said, adding “the perception cannot be that a wealthy felon can simply write a check and face no further punishment.”
But Kocoras was swayed by the 70 letters he received from Warner’s supporters, including Vasilakos. He read aloud sections of letters from employees of Warner’s who’d received huge bonuses after Warner struck gold by inventing Beanie Baby toys in the 1990s, and from charities and non-profits that have received millions of dollars from Warner, including tennis ace Andre Agassi’s charter school foundation and the Children’s Hunger Fund.
“The public humiliation the defendant has suffered is manifest,” the judge said. “Only he knows the private torment he has suffered.”
Kocoras ordered Warner to do his community service teaching kids at Leo High School, Edward Tilden High School and Ellen Richards Career Academy, and to pay a $100,000 fine on top of those he’d already agreed to pay.
Warner broke down in tears when he pleaded guilty last year, but he was more controlled in court Tuesday.
“I want to apologize to the court for the conduct that brings me here today,” he told the judge.
“I’m overwhelmed and humbly thankful for all the letters of support from so many people. I never expected such understanding and such kindness. I will be forever grateful to them.”
The letters of support “made my feelings of shame and embarrassment so much more unbearable,” he added.
Warner’s attorney Gregory Scandaglia had earlier complained that Warner was unfairly singled out. More than 40,000 Americans who also hid offshore accounts have been allowed to escape prosecution under an IRS amnesty to which Warner was denied access, he argued.
But Petersen said Warner had only applied for amnesty once his personal banker and another wealthy toymaker were indicted in the same scheme and it was “a near certainty that the U.S. was going to discover his account.”
Strict orders that Warner gave Swiss bankers at UBS not to contact him and to destroy any records after five years showed he knew what he was doing was wrong, she said, adding that the government still doesn’t know where the mysterious money in the Swiss account came from.