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Beanie Babies billionaire Ty Warner enters emotional guilty plea

Suburban Chicago businessman Ty Warner, a college dropout who became a billionaire after creating Beanie Babies collectibles, pleaded guilty Wednesday to tax evasion and apologized in a choked-up voice for hiding millions of dollars in a Swiss bank account.

"When I signed those returns, I knew those moneys were missing," Warner said. "It was not accurate. I apologize for my conduct. It's a terrible way to meet you," Warner told the judge. Struggling to keep his composure, Warner rubbed the back of his neck as he spoke and also said he had much to be thankful for.

His lawyer said he'll also pay $53.5 million in civil penalties for not disclosing the existence of a foreign bank account.

In court, Warner acknowledged that he told no one of his foreign bank accounts, not even his accountants. Warner even concealed his name from one account by registering it as "Molani Foundation," a "sham company," prosecutors said in court.

"I made a mistake," Warner said. Questioned by the judge about his education, Warner said he attended Kalamazoo College for one year before dropping out.

Warner, 69, trim and wearing a dark suit, white shirt and dark rectangular glasses, said in court that he was hard of hearing, causing U.S. District Judge Charles Kocoras to speak up and use a microphone.

"I'm pleading guilty because I am guilty," said Warner, whose continued expressions of remorsefulness led Kocoras to interrupt him, saying he could say more at his sentencing Jan. 15.

Last month, his lawyer and federal authorities said he would plead guilty.

Warner, who remains free on an individual recognizance bond, faces up to five years in prison for one count of tax evasion. Sentencing guidelines call for prison time of 46 to 57 months, according to Warner's 18-page plea agreement.

After his arraignment, Warner spent more than two hours being processed by the pretrial services office, which is short-staffed because of the government shutdown. About 12:30 p.m., Warner left the Dirksen U.S. Courthouse in downtown Chicago and got into a black hired car. He had no comment to questions shouted by news crews.

Prosecutors say he failed to report $24.4 million in income from 1999 to 2007 and failed to pay taxes of about $5.6 million.

The $53 million in civil penalties is due to Warner not disclosing his foreign accounts. Taxpayers must report financial accounts in foreign countries if their value exceeds $10,000. Such penalties can equal up to 50 percent of the amount in the account. The account had as much as $107 million at one time, it was disclosed Wednesday.

It could be the largest offshore account penalty ever publicly reported, Jack Townsend, a Houston lawyer who tracks offshore account cases, told the Tribune last month.

The judge said Warner, who lives in Oak Brook, may continue to travel internationally. His stuffed-toy company, Ty Inc., of which he is sole owner, is based in Westmont. He ranks 209th in a recent Forbes list of the richest Americans. His net worth is estimated at $2.6 billion.

Warner has paid more than $1 billion in federal taxes during his lifetime, his lawyer, Gregory Scandaglia, told the Tribune after the hearing.

The Internal Revenue Service has been cracking down on tax cheats with offshore bank accounts for the past four years. During that time, the U.S. has prosecuted 68 U.S. taxpayers, three Swiss banks, and 30 bankers, lawyers and advisers.

The IRS has conducted several amnesty programs since 2009, allowing U.S. taxpayers who had failed to report offshore accounts to pay stiff penalties but avoid prosecution. Warner applied to the program in 2009 but was rejected.

byerak@tribune.com

Twitter @beckyyerak

Copyright © 2015, RedEye
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