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Beanie Babies Creator Admits Guilt to Tax Evasion Charges

JOYCE NALTCHAYAN/AFP/Getty Images(CHICAGO) -- A tearful and apologetic H. Ty Warner, creator of Beanie Babies, pled guilty Wednesday to federal tax evasion stemming from what the U.S. Attorney's office says was an illegal offshore account the toymaker kept in Switzerland. He earlier agreed to pay a $53 million civil penalty in the case.

Warner, 69, of Oakbrook, Ill., could get up to five years in prison when he is sentenced in January. He broke down crying and apologized as he entered his plea today before a federal judge in Chicago.

He was accused of failing to report to the IRS income earned from that account. By that failure, according to the government's court filings, Warner attempted to evade $885,300 in income taxes he otherwise would have had to pay for 2002.

The charges announced last month allege that Warner hid from his accountants and the IRS more than $3.1 million in foreign income generated in a secret Swiss account, said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.

The charge against Warner results from an ongoing investigation by the IRS of bank accounts established by the Union Bank of Switzerland (UBS) for U.S. clients. UBS in 2009 admitted to having helped U.S. taxpayers hide money from the IRS, and, as part of an agreement with the IRS, agreed to provide the government with the names of customers.

The U.S. Attorney's Office said Warner cooperated with the investigation. He is the second U.S. taxpayer to be charged in connection with the IRS' investigation of UBS.

He faces a maximum $250,000 fine and five years in prison. U.S. taxpayers are required by federal law to pay taxes on all income, no matter where in the world it may have been earned.

Last month, Gregory Scandaglia, Warner's attorney, issued a statement in which he said that Warner had reached an agreement with the U.S. Attorney's office, "to resolve an investigation into an overseas account he opened in 1996. Mr. Warner will voluntarily enter a guilty plea to a single charge of tax evasion and resolve all issues with respect to any taxes owed. Also, as part of the plea agreement, Mr. Warner will pay a civil penalty of $53,552,248 for failure to file a Foreign Bank Account Report."

Warner and Scandaglia could not be reached for comment after Wednesday’s plea.

Scandaglia's statement concluded, "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. Mr. Warner accepts full responsibility for his actions with this plea agreement."

Copyright 2013 ABC News Radio

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