IRS v. Beanie Babies
Harold T. Warner, CEO and founder of Ty Inc., the company most famous for the creation of the extremely popular stuffed animal collection known as “Beanie Babies” has agreed to put in a guilty plea on felony charges of tax evasion. With his product’s more youthful appeal, Warner affectionately ‘goes by’ his middle named Ty (which was printed in the classic heart shaped tag attached to every stuffed animal his company was responsible for. Throughout the years Ty’s stuffed animals and other various items have touched the hearts of children, nostalgic adults, collectors, and many others; unfortunately, the 69 year-old has been in the news lately for a much different reason. The IRS has conducted a rigorous investigation that has been going on over the past few years, gradually collecting enough evidence to charge the “Beanie Babies” creator.
On Wednesday, Warner’s defense attorney released a statement that he intended to enter a plea of guilty to the charge and comply with the potentially severe consequences, including a non-negotiable restitution fine and possible prison time. The agreement was made between Warner and his counsel in a hearing with the United States Attorney for the Northern District of Illinois, where Ty conceded to pay a hefty fine totaling around $53.6 million to compensate for a little over $885,000 in unpaid taxes. The amount is said to be the largest penalty fine ever implemented on an undeclared off-shore account.
More and more cases like this are turning up in the current economic landscape, as the US government and the IRS are taking a stronger approach to pursue ‘undeclared off-shore [bank] accounts’ in hopes of charging these potential white-collar convicts. According to details in the investigation, Warner opened a Swiss account through a banking company named UBS AG (NYSE: UBS) in 1996 and later went on to moved it to Zürcher Kantonalbank (another Swiss bank) in 2002 under a phantom name; Warner transferred the money from his previous account into the latter, giving it a balance of $94 million. This is yet another case that was a result of UBS AG’s admission to the US government that it helped American taxpayers hide money for tax immunity.
Even after the paying the fine, Ty may not quite be out of hot water. The tax evasion charge is a felony that can not only lead to restitution payments, but also up to 5 years in prison. Gary S. Shapiro, the acting U.S. attorney in Chicago, stated, “Regardless of wealth, everyone must pay taxes on all of their income, not just the amount they choose to report. Such conduct invites federal prosecution.” Warner’s arraignment hearing has yet to be set as of Thursday.
Ty Warner, a self made billionaire, released ‘Beanie Babies’ in 1993 and after a year was said to have profited over $700 million in estimated sales. Now, Warner holds significant investments including hotels, resorts, property, and golf courses. Warner did not attend college and didn’t release ‘beanie babies’ until he was 48 years-old. Ty Inc. has actively involved it’s products in fundraisers like the production of the Beanie Baby ‘Ariel’ in 2000, who’s complete proceeds were donated to the “Elizabeth Glaser Pediatric AIDS Foundation (EGPAF)” that raised $3.4 million for the cause.
Warner is a distinguished philanthropist involved in many contributions including: donating $1.5 million to create the ‘Ty Warner Sea Center’ in California, more than $300 million worth of toys for a Red Cross blood drive, $6 million to the Andre Agassi Foundation for underprivileged children in Southern Nevada, and one million Beanie Babies for children in Iraq. According to Forbes, Warner is currently listed as #209 in the Forbes 400 – having an estimated net worth of $2.6 billion.
Photo Courtesy of Ty Inc. Official Facebook Page