Beanie Baby Founder Ty Warner Charged With Tax Evasion, Will Pay $53.5 Million Penalty

By Chuck Sudo in News on Sep 18, 2013 4:50PM

In this 2003 photo, Beanie Babies creator Ty Warner celebrates the 10th anniversary of the miniature stuffed toy that was all the rage in the late 1990s. (Photo credit: Chris Hondros/Getty Images)

Ty Warner has agreed to pay $53.5 million in penalties and plead guilty to a single charge of tax evasion for allegedly failing to report income the billionaire creator of Beanie Babies earned in a secret offshore account.

Warner’s attorney Gregory Scandaglia said in a statement his client “accepts full responsibility for his actions with this plea agreement.”

“This is an unfortunate situation that Mr. Warner has been trying to resolve for several years now - including through an attempt to enroll in the IRS’s Offshore Voluntary Disclosure Program in 2009,” Scandaglia added.

Warner was charged with maintaining a secret account with the Union Bank of Switzerland beginning in 1996. Warner transferred that account to another Swiss bank in 2002 and earned nearly $3 million on it, but failed to tell his accountants. Gary S. Shapiro, U.S. Attorney for the Northern District of Illinois, said in a statement, "Regardless of wealth, everyone must pay taxes on all of their income, not just the amount they choose to report. The charge alleges that Warner went to great lengths to hide from his accountants and the IRS more than $3.1 million in foreign income generated in a secret Swiss account.”

The reclusive Warner is the sole owner of Ty, Inc. and earned his fortune on the strength of sales of Beanie Babies, stuffed collectible toys that exploded in popularity in the 1990s. At the peak of the fad, the privately-owned Ty Inc. earned over $700 million in profits a year. Some families took to collecting Beanie Babies like they were investing in the stock market, only to find they their value plummet as interest in Beanie Babies waned. Warner invested in hotel properties, adding to his wealth, and became noted for his philanthropy.

Read the government's case against Warner here.