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May 11, 2014

Feds call probation sentence given to Beanie Babies billionaire substantively unreasonable

As detailed in this Chicago Tribune article, federal prosecutors have filed their merits brief with thr Seventh Circuit complaining about the probation sentence given to the billionaire creator of Beanie Babies after he pleaded guilty to hiding at least $25 million from U.S. tax authorities in Swiss bank accounts.  Here are some details of the filing:

The U.S. government on Friday appealed the sentence of billionaire Ty Warner, the Beanie Babies creator who recently received two years' probation for tax evasion.

In January, U.S. District Judge Charles Kocoras rejected calls from prosecutors that he sentence Warner to a prison sentence of at least a year for failing to pay income taxes on millions of dollars that he hid for years in Swiss bank accounts. Kocoras said he was swayed by letters detailing Warner's acts of kindness in giving him probation instead of prison.

The government's appeal on Friday said Kocoras gave too much weight to Warner's charitable acts, considering his wealth and that many of the letter writers were current or former employees....

In a court filing on Friday, prosecutors said the district court judge's ruling was "substantively unreasonable" and that Warner's sentencing should have served as a punishment and deterrence. It also said Warner's sentence provided "unwarranted sentencing disparities" as others have been treated more harshly for tax evasion....

It also said Warner's claim that he donated $140 million to charity was overstated because the figure included the retail value of Beanie Babies he had donated. A more accurate reflection of the cost would have been $36 million, the government said. The government also estimated that Warner's charitable contributions amounted to 2 percent of his net worth -- "a not extraordinary" amount.

A spokesman for Warner said it was unfortunate that "the government is spending resources to challenge a well-reasoned and careful sentence issued by a well-respected judge."

The government filing said the founder of Ty Inc. hid $100 million in Swiss bank accounts, refused to report $24 million of it to the Internal Revenue Service, and evaded $5.5 million in taxes. At the time of his sentencing, his net worth was $1.7 billion.

Critically, though not mentioned in this article and likely not stressed in the government's appeal, in In addition to probation, Judge Kocoras ordered Warner to do 500 hours of community service at Chicago high schools, and Warner had already previously agreed to pay $27 million in back taxes and interest, and a civil penalty of more than $53 million.  Though the absence of any prison time surely bothers the feds and has prompted this appeal, the fact that Warner's foolish bit of tax dodging has already seems to have cost him more ten times the taxes he sought to evade strikes me as punishment enough.  For these sort of economic crimes, I tend to think an expensive economic punishment is more efficient and effective than prison time.  But, obviously, federal prosecutors do not agree.  And it will be interesting to see what the Seventh Circuit will have to say ultimately.

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May 11, 2014 at 09:47 PM | Permalink


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I agree with Doug. These federal prosecutors should reconsider their position. We are not talking about a pedophile priest who has pedophiled many kids across many state lines. Of course they don't prosecute those perps.

Posted by: Liberty1st | May 11, 2014 11:01:26 PM

i agree. I think the fed's in this case are two-faced assholes for one thing he shouldn't be punished for making money OUTSIDE the united states. funny how the only two countries in the WORLD that do that is the US and IRAN. Great company we are keeping.

I think he'd have been better off using that what 70 million in fine's and restitution killing off any federal stooge who looked his way! long enough to move his income OUT of this fucked up country and joining it outside our jurisdiction.

Posted by: rodsmith | May 11, 2014 11:14:41 PM

So, the three of you (including Professor Berman) advocate being able to buy your way out of prison? If a not-so-well-off person evades taxes and owes (for argument's sake) $10,000 and can't afford to give $500 to charity and pay the back taxes, they should go to prison? A system that allows the rich to buy themselves out of a prison term is not justice at all. A law professor advocating "Prison only for the poor" is not the kind of law that should be taught.

Posted by: Kelly | May 12, 2014 8:58:35 AM

I absolutely agree. Expecting rich people to do prison time like the rest of us, rather than buy their way out with a fine? Heavens to Betsy -- what is this country coming to?!?!

Posted by: Right on! | May 12, 2014 10:41:05 AM

no not quite Kelly. I think taxing individuals on income created OUTSIDE the country illegal. We are in a big minority there. Just the United States and Iran do it. when 2 out what what 400 countries worldwide do it. You are the problem.

the case shows the crime was hiding what $5.5 million in taxes. At the time of his sentencing, his net worth was $1.7 billion.

sorry 5.5m on 1.7 billion is a rounding error. and when they found the so-called CRIME they stole about 80 million. bullshit.

Posted by: rodsmith | May 12, 2014 11:41:34 AM

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