Beanie Babies Creator Gets Probation, No Prison

The billionaire businessman behind Beanie Babies was sentenced Tuesday to two years of probation, but no prison time, for not paying taxes on millions of dollars stashed in Swiss bank accounts, with the judge praising the toy magnate for his charity work.

H. Ty Warner, 69, issued a somber but composed apology before being sentenced in Chicago federal court, saying he felt “shame and embarrassment.” He pleaded guilty last year to a single count of tax evasion for not paying taxes on $25 million in income he had hidden.

Warren could have been sentenced to up to five years in prison, and a prosecutor asked U.S. District Judge Charles Kocoras on Tuesday to impose at least a year behind bars. But Kocoras opted against prison time, and spent most of the 20 minutes during which he explained his sentence praising the businessman’s charitable work. He cited a $20,000 medical bill Warner paid for a stranger with a kidney ailment, and Warner’s $20 million charitable donation of proceeds from a toy he helped design commemorating Princess Diana after her death.

“I find Mr. Warner to be a very unique individual … in his service and kindness to mankind,” Kocoras said in explaining his decision to forgo prison time. “Society will be better served by allowing him to continue his good works,” he said, noting that Warner had already paid a price in “public humiliation” and “private torment.”

Prosecutor Michelle Petersen told the judge that Warner’s charity — however laudable — should not keep him out of prison. She said Warner had been meticulous about hiding his income from U.S. tax authorities over a period of at least 11 years.

“(Without prison time), tax evasion becomes little more than a bad investment,” she told Kocoras. “The perception cannot be that a wealthy felon can just write a check and not face further punishment.”

As part of his probation sentence, Kocoras also ordered Warner to do 500 hours of community service. When he pleaded guilty, Warner agreed to pay a civil penalty of more than $53 million and $5 million in back taxes.

Warner was among the highest-profile prosecutions in the federal government’s push to go after Americans concealing income from the IRS overseas, often in Switzerland. Prosecutors say that at one point, Warner was concealing as much as $107 million.

Beanie Babies first appeared in the mid-1990s, triggering a craze that generated hundreds of millions of dollars for Westmont, Ill.-based TY Inc., of which Warner is the sole owner. Forbes recently put his net worth at $2.6 billion.

The small, plush toys have heart-shaped name tags and are made to resemble bears and other animals. Some are designed to look like cartoon characters. As collectibles, some fetch thousands of dollars.

Warner maintained a secret offshore account starting in 1996 with the Switzerland-based financial services company UBS. He earned $3.1 million in gross income in 2002 through the account, but didn’t report it, prosecutors say.