On September 18, 2013, the Department of Justice announced that Ty Warner, creator of Beanie Babies, was charged with federal tax evasion for allegedly failing to report income he earned in a secret offshore financial account he held with UBS in Switzerland. Warner ranks as # 209 on the Forbes list of richest Americans.
The government also announced that Warner is cooperating with the Internal Revenue Service and will plead guilty to one count of tax fraud for failing to report $3.2 million in earnings from a secret account at UBS on his 2002 return. In February 2009, UBS entered into a deferred prosecution agreement with the United States, admitting that it helped taxpayers hide accounts from the IRS. As part of the agreement, UBS provided the government with the identities of, and account information for, certain U.S. customers.
According to the government, Warner maintained a secret offshore account with UBS starting in 1996. In late 2002, Warner transferred the assets in his UBS account to a second Swiss financial institution, Zürcher Kantonalbank, when the account had a balance of more than $93 million. In 2002, Warner earned approximately $3,161,788 in gross income through investments held in his UBS account. Warner allegedly committed tax evasion for that year by failing to tell his accountants about that income and by failing to report that income or the existence of the UBS account in his 2002 original tax return, as well as an amended return filed in 2007.
Warner, according to a statement from his attorney, has agreed to pay a $53.6 million FBAR penalty for his undisclosed account. The penalty represents half the account’s highest balance. Interestingly, Warner apparently tried to enroll in the IRS Offshore Voluntary Disclosure Program in 2009, but was rejected, probably because the IRS already obtained his name from UBS.
Tax evasion carries a maximum penalty of five years in prison and a $250,000 fine.