Beanie Babies Billionaire Avoids Prison for Tax Evasion

, The Litigation Daily

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Tax fraud
Tax fraud

Beanie Babies billionaire Ty Warner dodged a potential jail term for tax evasion on Tuesday, instead earning two years of probation for hiding millions of dollars from the Internal Revenue Service. The decision is a relief for Warner, whose tiny stuffed animals were a defining toy craze of the 1990s, and a win for his lawyers at Scandaglia & Ryan, Caplin & Drysdale and Kirkland & Ellis.

Warner pleaded guilty to one count of tax evasion in October for hiding nearly $25 million in Swiss bank accounts from 1996 through 2008. As part of his plea deal, he agreed to pay a $43 million civil penalty and fork over more than $16 million in back taxes.

The sentencing memo Warner's lawyers filed on New Year's Eve urged U.S. District Judge Charles Kocoras in Chicago to consider the toy tycoon's charitable work as a mitigating factor. Despite federal prosecutors' request for a jail sentence, Kocoras agreed on Tuesday and declined to order any prison time.

Prosecutors didn't request a specific prison term in their own sentencing memo. But they pointed out that the Federal Sentencing Guidelines for Warner's offense point to a range of 46 to 57 months.

According to the Chicago Tribune, Judge Kocoras read aloud at Tuesday's sentencing hearing from dozens of letters he received detailing Warner's charitable works. He ultimately sentenced Warner to two years' probation and 500 hours of community service.

"We are grateful for and humbled by the judge’s ruling," Gregory Scandaglia of Scandaglia & Ryan said in a written statement. "The judge heard from many people who have benefited from Ty's quiet generosity over the years, and he crafted a sentence that allows Ty to continue to make amends in a way that most benefits society."

According to the Tribune, Chicago U.S. Attorney Zachary Fardon told reporters after the hearing that despite the lack of jail time, Warner has paid a record fine and will bear the shame of being a convicted felon. "It's not what we asked for," he said. "But we have taken a position we think is fair and right under the circumstances, and that is the best that we can do."

Along with Scandaglia, Warner is represented by former Manhattan U.S. Attorney Michael Garcia of Kirkland & Ellis and by Mark Matthews of Caplin & Drysdale in Washington, D.C.

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