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October 10, 2014


Appeals Court Judges Grill Prosecutors in Warner Tax Evasion Case

Federal prosecutors faced a three-judge panel in an effort to replace the probation sentence of Beanie Babies founder Ty Warner with prison time after the billionaire was found guilty for failing to report more than $24 million to the Internal Revenue Service.

Warner pleaded guilty to one count of tax evasion last year after federal authorities discovered he had been hiding millions of dollars in Swiss banks for more than a decade. Prosecutors had been pushing for at least one year in prison in order to make an example to others who might be considering the same crime, however, Warner’s defense attorneys argued that many tax evaders were allowed to participate in an amnesty program and that, of those who had been criminally charged and convicted, more than half received probation.

Ilana Rovner, a U.S. appeals court judge for the seventh circuit, said that she found it difficult to comprehend why the government would seek to disregard Warner’s sentence while many tax evaders receive probation or may not even face prosecution. She also noted the taxes Warner evaded amounted to a mere fraction of what he had already paid to the Internal Revenue Service.

The billionaire paid a civil penalty for failing to report the offshore accounts and restitution for what he owed in back taxes and interest.

While Michelle Peterson, Assistant U.S. Attorney, acknowledged to Rovner that Warner had “paid a great deal in taxes,” she suggested $5.5 million was a lot of money to be missing from the Treasury Department and that any prison sentence would have been a better deterrent than probation.

Source: Yerak, Becky, “Prosecutors in Warner Tax Evasion Case Grilled by Appeals Court Judges,” Chicago Tribune, September 17th, 2014

Offshore Accounts/International Tax Disputes