CHICAGO--The creator of Beanie Babies pleaded guilty to
federal-tax evasion Wednesday, apologizing in court for what
prosecutors say was the hiding of tens of millions of dollars in
income in offshore accounts.
Ty Warner, chief executive of Ty Inc., the maker of stuffed
dolls, will face up to five years in prison when he's sentenced
early next year. He also will owe the government $53.6 million for
failing to file a report on foreign financial accounts, the largest
offshore-account penalty ever reported.
"I apologize for my conduct," said Mr. Warner in U.S. District
Court here. "I made a mistake. I'm fully responsible."
Mr. Warner, who is 69 years old, became a billionaire in the
1990s after creating the popular stuffed animals, which drew
children and collectors alike. He branched out into luxury
properties with Ty Warner Hotels & Resorts, which owns Four
Seasons hotels in New York and Santa Barbara, Calif.
Mr. Warner pleaded guilty to the felony charge for failing to
pay taxes on $3.2 million in earnings in 2002 made through
investments in an account at Swiss bank UBS AG (UBS, UBSN.VX),
according to court documents.
Although pleading guilty to the single count, prosecutors said
Mr. Warner failed to report a total of $24.4 million in income from
offshore accounts over more than a decade, hiding the existence of
the accounts from business and personal accountants.
The case against Mr. Warner is part of larger crackdown by the
U.S. government on undeclared offshore accounts that intensified
after UBS admitted in 2009 to helping U.S. taxpayers hide money
abroad.
An analysis done earlier this year found U.S. courts have been
more lenient in cases tied to the government crackdown on secret
offshore accounts. The average sentence in criminal offshore cases
has been about half as long as in tax-shelter schemes, according to
a comparison of Internal Revenue Service statistics and data
compiled by Houston attorney Jack Townsend, who publishes the
Federal Tax Crimes blog. In many cases, judges are also opting for
shorter sentences than recommended under federal guidelines.
--Laura Saunders contributed to this article.
Write to Mark Peters at Mark.Peters@wsj.com
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