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Philanthropic Swiss bank client avoids jail for US tax evasion

Monday, 20 January, 2014

Ty Warner, a hugely wealthy American businessman, has been sentenced to two years probation after being convicted of hiding untaxed assets in Swiss banks.

Sixty-nine-year-old Warner must also pay a civil penalty of USD53 million ‒ a large sum, but modest compared to his USD1.7 billion personal fortune of billions derived from the Beanie Babies craze and a hotel chain. Warner also has to pay USD27 million of unpaid taxes and interest.

Warner opened his UBS account in 1996 when his toy business was at its zenith. Seven years later, when the US Department of Justice had begun its decade-long investigation of UBS's activities with US clients, Warner transferred the balance of nearly US100 million to the Zurich Cantonal Bank. The accounts were not disclosed in his US tax returns or FBARs (foreign bank account report forms) for the years from 1999 to 2007, earning him USD25 million in interest on which he should have paid USD5.5 million in tax. He pleaded guilty to a single charge of tax evasion for the year 2002.

But unlike several other Americans prosecuted for concealing assets in Swiss banks, Warner has escaped a jail sentence. The Chicago district judge appears to have taken into account his voluntary community work, which amounts to an 'overwhelming' number of private acts of 'kindness, benevolence and generosity'. The beneficiaries are reported to be local schools and city parks, a kidney dialysis patient, and former employees.

Dozens of Warner's acquaintances wrote to the court describing his philanthropic activities and asking for leniency.

The judge complied, putting Warner on probation for two years and sentencing him to 500 hours of community work with schoolchildren. The maximum sentence available was five years imprisonment.

The sentence disappointed the prosecuting attorney, Michelle Petersen, who had demanded prison time. She noted that last year the same court had sentenced another tax evader, Peter Troost, to a year's imprisonment, even though he had only concealed USD3 million in his Swiss account.

The judge's refusal to jail Warner made his tax evasion into 'little more than a bad investment,' said Petersen.

However, another reason for the judge's leniency was the fact that Warner had applied to join the Internal Revenue Service's voluntary disclosure facility. His application, made in September 2009, was rejected because an investigation of his affairs had already begun.

Sources

Comments

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