United States v. H. Ty Warner
2015 U.S. App. LEXIS 11938
| 7th Cir. | 2015Background
- H. Ty Warner, founder of Ty Inc. (Beanie Babies), admitted willful tax evasion for hiding funds in a Swiss account and pled guilty to one count under 26 U.S.C. § 7201; tax loss attributed was $5.6 million.
- Warner paid full restitution and a civil FBAR penalty of $53.6 million before sentencing and agreed to the guidelines calculation, which yielded an advisory range of 46–57 months’ imprisonment.
- The government recommended a sentence "in excess of a year and a day" (well below the guidelines); the probation office recommended 15 months; Warner sought probation with 500+ hours of community service.
- At sentencing the district court found extensive, credible evidence of long‑standing, private charitable acts and exceptional character, and imposed two years’ probation, 500 hours community service, a $100,000 fine, and costs.
- The government appealed, arguing the noncustodial sentence was substantively and procedurally unreasonable for failing to account adequately for deterrence, seriousness, and sentencing disparities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court procedurally erred by failing to consider § 3553(a) factors (deterrence and disparities) | District court overlooked or inadequately addressed deterrence and unwarranted disparities | District court considered and weighed those factors; no checklist required; explanation sufficient for review | No procedural error; court addressed § 3553(a) factors and gave adequate reasons |
| Whether the probationary sentence was substantively unreasonable given guidelines range | Probation is insufficient to reflect seriousness, deter tax evasion, and avoid unwarranted disparities with other UBS prosecutions | Warner’s unique characteristics, attempted OVDP disclosure, plea, prompt payments, and large FBAR penalty justify probation | Sentence substantively reasonable; district court did not abuse discretion |
| Whether Warner’s charitable acts improperly influenced sentencing (i.e., wealth as a "get out of jail" card) | Charitable donations largely self-serving, partly after notice of investigation, and insufficient to justify avoiding incarceration | Letters and other evidence showed sincere, long‑standing, private benevolence probative of character under § 3553(a)(1) | Court’s factual findings about Warner’s character were supported by the record and permissibly weighed |
| Whether the sentence creates unwarranted sentencing disparities with similarly situated UBS defendants | Other UBS defendants with smaller tax losses received prison; similar treatment should apply to Warner | Warner materially differs (unique character, FBAR penalty payment, attempted OVDP, government’s own lenient prosecution) | No unwarranted disparity: Warner is not similarly situated to the cited comparators and many offshore cases result in probation |
Key Cases Cited
- United States v. Booker, 543 U.S. 220 (guidelines are advisory)
- Rita v. United States, 551 U.S. 338 (appellate courts must give respect to sentencing judge’s reasoned decision)
- Gall v. United States, 552 U.S. 38 (review framework for procedural and substantive reasonableness of sentences)
- United States v. Repking, 467 F.3d 1091 (7th Cir. 2006) (reversal where alleged good works insufficiently supported leniency)
- United States v. Wachowiak, 496 F.3d 744 (7th Cir. 2007) (upholding individualized below-guidelines sentence when supported by record)
- United States v. Molton, 743 F.3d 479 (7th Cir. 2014) (district court must explain and support magnitude of variance)
- United States v. Omole, 523 F.3d 691 (7th Cir. 2008) (requirement to state reasons in open court for sentence)