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January 14, 2014

You be the federal judge: what sentence should the Beanie Babies billionaire get for tax evasion?

Beanie babyAs reported in this short AP article, today "the billionaire creator of Beanie Babies is in a Chicago federal courtroom for his sentencing on a tax evasion charge." Here is more:

H. Ty Warner could get up to five years in prison Tuesday for evading taxes on $25 million in income. The 69-year-old Warner was told when he pleaded guilty last year that he would have time at his sentencing to apologize for stashing money in Swiss bank accounts.

Warner's attorneys have asked the judge for a sentence of probation, not prison. They pointed to Warner's unhappy childhood and his charity work. Prosecutors say Warner should spend some time in prison, though they haven't recommend how much. They also say his philanthropy shouldn't be "a get-out-jail card."

Though perhaps not authorized by federal law, my proposed punishment for this billionaire would be a week in jail, a maximum (lifetime?) term of supervised release (for which he has to pay the costs), plus a fine of $100 million (four times the amount of income he tried to hide). According to Forbes here, Warner's net worth is 2.6 billion, and thus a $100 million fine for him is the equivalent of only a $100,000 fine for someone worth $2.5 million. Ergo, such a fine should clearly not be considered constitutionally excessive for Warner and it should better help deter rich folks from illegally trying to avoid paying their fair share.

Importantly, the maxed out term of supervised release is a big aspect of my proposed ideal sentence. Though some may think a few years in prison for a white-collar offender is more onerous than other punishments, I suspect a billionaire like Warner would be much more bothers by forever being subject to control of his liberty by probation officers. (I would also like to order Warner to a community service requirement of coming to my house each year to clear the dust off my kids' stuffed animals, but I am not sure I would be able to get away with such a term of service even if I was a federal judge.)

UPDATE:  This Reuters article indicates that Warner's sentencing outcome in federal court on Tuesday is resulting in him paying for his nonviolent crime in a lot of ways, but not with any time in prison: 

The billionaire creator of Beanie Babies, Ty Warner, will serve two years of probation, including mentoring high school students, following his guilty plea on a tax evasion charge, but no jail time, a federal judge ruled on Tuesday. Warner, 69, who pleaded guilty in October, told U.S. District Court Judge Charles Kocoras in Chicago that his crime was the "biggest mistake" of his life. Warner already had agreed to pay a civil penalty of nearly $53.6 million.

Ranked as the 209th richest American by Forbes with a listed net worth of $2.6 billion in 2013, Warner failed to report more than $24.4 million in income and evaded nearly $5.6 million in federal taxes from millions hidden in Swiss bank accounts, according to Chicago prosecutors.

Prosecutors had argued that Warner should serve time in jail given the extent of the cover-up, and federal guidelines called for up to five years in prison. "I am truly sorry," said the slightly-built Warner, who wore headphones to compensate for hearing loss. He told Kocoras the letters of support he received "made my feelings of shame and embarrassment that much more unbearable."

Kocoras cited Warner's many acts of charity before imposing probation rather than prison. Kocoras said he had reviewed letters from people helped by the billionaire, including a woman with a kidney disease Warner had stopped to ask for directions. After learning of her condition, Warner paid for her treatment. "Society will be best served by allowing him to continue his good works," Kocoras said.

Warner was sentenced to at least 500 hours of community service, which will include mentoring students at Leo High School, a Catholic boys' school in a poor, mostly African-American neighborhood in Chicago....

The federal charge to which Warner pled guilty alleged that, in 2002, Warner earned more than $3.1 million through investments held in his UBS account, but did not tell his accountants and failed to report it on his tax form.

January 14, 2014 at 11:33 AM | Permalink


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Can he also be ordered to pay costs in the amount of investigation expenses and court costs?

Posted by: Ala JD | Jan 14, 2014 1:36:13 PM

Correction plans are modular. Deprivations lie at their core. A sentence is the fixed part of the Deprivation Module in a Correction Plan for a specific offender. The courts are well situated within the criminal justice system to make sentencing decisions; i.e., enforce penalties and punish offenders. Penalties and punishments are based on facts that do not change once established; both are deprivations. In other words, both constitute fixed deprivations (restraints, requirements and takings). Penalties are set before the fact to forestall conduct, and imposed after the fact to maintain their credibility. Punishments are imposed after the fact to underwrite social norms, within a range that was set before the fact to provide notice.

The court should impose both a penalty and punishment in this case. Penalties and punishments are recursive. That deprivation that is most restrictive should control, since both are composed of deprivations. Deprivations should be graded by public policy, based on their level of restraint upon an offenders life-space. Prisons and communities are just places where deprivations of many kinds are executed.

The courts are poorly situated within the criminal justice system to make risk control decisions, because the probability that an offender will commit another crime is changeable. No one can truthfully say today that a person must be incapacitated for a lengthy period of time because they will be dangerous at some distant point. The best that can be done is to periodically estimate a person’s risk of recidivism within a probability range. The courts are not equipped administratively and judges are not prepared by training to make periodic risk determinations.

The so-called sentencing revolution dumbed-down the correction planning process, placing the courts in an unrealistic, risk-controlling role. In this case, there is little probability that the offender would recidivate, given his age and circumstances. Risk is probably not an issue. In those cases where it is an issue, the state should create risk control commission as an alternative to parole boards.

Posted by: Tom McGee | Jan 14, 2014 5:07:53 PM

25m out of 2.6 billion is nothing. A rounding mistake. the man should spend 25% of that 2.6billion to get himself removed from the clutches of our criminal govt.

Posted by: rodsmith | Jan 15, 2014 12:33:34 AM

Leona Helmsley claimed work done on her provate home as a business expense. She stiffed the contractors who then reported her. She evaded $4 million. She argued she had paid $400 million in taxes, court should go easy. It did not. In prison, she offered 50 cents for making her bed. Upon leaving, she stiffed the people who made her bed.

There is no rehab, only incapacitation. Would that purpose be served in this case? Doubt it, so sentence seems correct.

Posted by: Supremacy Claus | Jan 15, 2014 11:40:49 AM

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