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September 22, 2014


Federal prosecutors appeal tax evasion sentence

The tax case against the founder of Beanie Babies, Ty Warner, continues as prosecutors challenge the lenient probation sentence handed down after Warner pleaded guilty to one count of tax evasion.

Prosecutors alleged that Warner failed to report $24 million by hiding money in two Swiss offshore bank accounts, which allowed him to avoid paying $5.5 million in federal taxes. Sentencing guidelines allowed for prison sentence of up to 57 months, but prosecutors pushed for at least one year in prison to deter others.

Warner’s defense cited to the amnesty program that allowed many with foreign accounts to avoid criminal charges. Even when charged criminally, more than half of those convicted only received probation sentences. Warner had also paid a civil penalty and back taxes plus interest.

The federal appeals judge for the seventh circuit questioned why prosecutors wanted to throw out the sentence when the amount of the taxes he evaded was a small fraction of the amount he did pay. At oral arguments, the appellate judge also brought up the discretion of the sentencing judge and his experience as a “veteran” who “obviously agonized” over his decision in the case.

The prosecution responded by arguing that the even though he had paid taxes, $5.5 million was a large sum to go missing from the Treasury Department. In regards to the sentencing judge’s discretion, the prosecutor commented that, “judges make mistakes from time to time.” These arguments may not be enough to justify throwing out the decision to order probation instead or prison.

Because of the discretion afforded to trial court judges, it is difficult to overturn a sentencing decision on appeal. Deciding the proper sentence involves weighing the individual facts in the case. For this reason, it is important to seek the counsel of an experienced tax attorney who can help resolve the criminal tax charges in the best possible manner at the trial court.

Source: Chicago Tribune, “Prosecutors in Warner tax evasion case grilled by appeals court judges,” Becky Yerak, September 17, 2014.

Tax Crimes