Money can't buy love, but it can keep you out of prison.

• Author: Beavers, James A.
• Position: Criminal tax evasion remedies

In what looks to be the end of the tax evasion saga of H. Ty Warner, the billionaire behind the Beanie Babies toy empire, the Seventh Circuit upheld a district court's curious decision to spare Warner prison time for engaging in a decade-long scheme to evade taxes by hiding assets in a Swiss bank account.

Background

Warner struck it rich in the early 1990s with his line of Beanie Babies dolls, eventually becoming a billionaire from selling the plush toys. In 1996 through 2007, Warner hid some $100 million of his gains in Swiss bank accounts, thus avoiding tax of $5.6 million on the $24 million in interest he earned on the money in the accounts.

In the end, however, things went south when the U.S. Justice Department began its probe of Swiss banker UBS. The DOJ's investigation turned up Warner's account, and in 2013 he was charged with criminal tax evasion. Warner pleaded guilty for his misconduct related to the Swiss accounts for the years 1996 to 2007. As part of his plea agreement, he agreed to pay lull restitution and a civil penalty of $53.6 million under 31 U.S.C. Section 5321 for failure to file FinCEN Forms 114, Report of Foreign Bank and Financial Accounts (FBAR).

Under the plea, Warner was also subject to a criminal penalty. Under the relevant federal sentencing guidelines, the advisory sentencing range was 46 to 57 months in prison. The government charitably requested a far less severe sentence of "in excess of a year and a day." The district court judge was even more charitable, sentencing Warner to only two years of probation, community service, and $100,000 in fines and costs. Applying the sentencing factors set forth in 18 U.S.C. Section 3553(a), the court decided to impose this below-guidelines sentence based on "the nature and circumstances of the offense and the history and characteristics of the defendant."

Although the court admitted that Warner's offense was very serious and that other tax evaders had been imprisoned for far less, it found that his situation was unique. First, the judge observed that Warner had already paid an enormous civil penalty, had been through a humiliating prosecution, and was unlikely to commit further crimes. More importantly, though, the judge stated that he was moved by the many letters the court had received testifying to Warner's good character and outstanding generosity, which led the court to decide that the good works he had done in life outweighed his misconduct and that society would be...