Beanie Baby founder and billionaire Ty Warner has agreed to plead guilty to a felony tax evasion charge in Chicago federal court and pay a $53.5 million penalty, officials announced Wednesday.
The Chicago Tribune reported
that Warner will formally enter the plea in front of U.S. District Judge Charles Kocoras on Oct. 2. Federal prosecutors accused Warner of failing to report earned income from a secret offshore account in Switzerland he had with the financial services firm UBS.
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Forbes magazine ranks Warner, 69, the 209th richest American, with a net worth estimated at $2.6 billion.
"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," Gary Shapiro, U.S. attorney for the Northern District of Illinois, said in a statement.
Warner did not pay $885,300 in taxes for the 2002 calendar year, court documents state.
Warner is the sole owner of the Chicago-based Ty Inc. Investigators claimed he opened up his account in Zurich, Switzerland in 1996 and told bank officials not to mail him letters about the account.
"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," Warner’s lawyer, Gregory Scandaglia, said in a statement. "Mr. Warner accepts full responsibility for his actions with this plea agreement."
Ty Inc. created the iconic Beanie Babies that first appeared in stores in the mid-1990s, and immediately became popular among children and toy collectors. The toys, which resemble hundreds of animals, are identified by their heart-shaped name tags.
Branding expert Allen Adamson, of the New York firm Landor Associates, told the Associated Press that Beanie Babies sales could take a hit with the announcement.
"It's so jarring because this product feels so sweet, so innocent," Adamson said. "To find out the person behind it isn't so sweet and innocent. ... Beanie Baby's getting a black eye."
Another branding expert, Laura Ries, told the Associated Press that few Beanie Babies purchasers associate Warner's name with the toy, so product sales and the brand’s reputation should not be affected.
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