United States v. H. Ty Warner

appeal claim this VDF’s second America, UNITED STATES of paid that Stiefel J & million

is that the $8.5 Plaintiff-Appellant, constituted ad for their stock J’s owners therefore royalties, a third of which vance Although Stiefel’s will were owed to VDF. WARNER, Defendant-Appellee. H. TY (as Stiefel’s pay price that ingness confirm) based on fore own documents No. 14-1330. royalty receipts from of J & J’s future cast Appeals, United Court of States CoffeeBerry, the license VDF sales of Seventh Circuit. royalties & limited the granted J J money owe VDF to

that J & J would Argued Sept. 2014. [CoffeeBerry] “based on the actual sale July Decided or its sublicensees Products Licensee actually by Licensee.” are collected which stock, CoffeeBerry owners sold

J & J’s Stiefel, rather J

products, million Stiefel

& J received company’s stock. VDF’s

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of the short, merit, has no appeal, appealed from is therefore

the decision

Affirmed. 3553(a). Fullerton, Attorney, D. Michelle U.S.C. The court here did not

Stuart Petersen, Attorney, Office Of The Rather, Marie fully abuse its discretion. ex- IL, Attorney, Chicago, States United plained supported its decision Plaintiff-Appellant. reached an outcome that is reasonable un- unique der the circumstances of this case. Clement, Erin Attorney,

Paul D. Mur- We therefore affirm Warner’s sentence. PLLC, Attorney, Bancroft Mark E. phy, Matthews, Attorney, Caplin Drysdale, & DC, Shapiro,

Washington, Michael Samuel Background I. IL, Attorney, Scandaglia Ryan, Chicago, & Chicago born 1944 and Defendant-Appellee. grew up family. in a troubled He attend- FLAUM, KANNE, Before military high ed school Wisconsin and ROVNER, Judges. Circuit year spent College, at Kalamazoo ultimately dropped out because he could KANNE, Judge. Circuit longer no afford tuition. To make ends Warner, Ty Defendant H. the billionaire meet, jobs, he worked a series of odd Babies, creator of Beanie evaded mil- $5.6 bellman, including busboy, stints as a by hiding lion in U.S. taxes assets in a Eventually, and a door-to-door salesman. pled guilty Swiss bank account. He to one selling plush he found his feet children’s evasion, restitution, count of tax made full toys Toy Company. for the Dakin Within paid penalty. and million civil $53.6 years, a few top he was Dakin’s salesman. Sentencing provided Guidelines a recom- imprison- mended 46- 57-month term of In plush Warner formed his own ment, judge gave but the district Warner Inc., toy company, Ty initially which he years’ more lenient proba- sentence: two by ran himself out of his condominium. service, community plus tion with big early His break came in the 1990s with $100,000 fíne government and costs. The toy the introduction of a new to the mar- claims his sentence is unreasonable be- success, Baby. ket: the Beanie A huge the it does not cause include a term of incar- Baby propelled Ty Beanie Inc. into a mul- ceration. ti-billion-dollar company and made Warner rich. His net worth at the time of sen- case, typical In a might agree. tencing roughly was billion. But this not a typical case. The district judge found charity Warner’s record of Indeed, “overwhelming.”

and benevolence A Warner’s Tax Evasion and At- judge remarked that Warner’s conduct tempted Disclosure unprecedented was through when viewed 1996, during early In period judge’s more-than-three decades on success, Beanie Babies’ Warner traveled to the bench. opinion, district court’s Zurich, Switzerland, opened an off- this and mitigating other factors—includ (“UBS”). account shore bank at UBS AG ing the uncharacteristic nature of War The record does not much disclose how crime, attempt his to disclose his ner’s money originally deposited Warner or account, payment of a ten from, where the funds came but within loss, times the size of the tax and the years several the account contained $93 government’s own request for a sentence advice, million. Consistent with their well the guidelines range justified below — instructed his not to bankers send leniency. enjoy District courts broad dis any correspondence destroy him and to all cretion to fashion an appropriate, individu alized in light years. of the factors in 18 account documents after five He did began to the Internal Rev- with an report investigation the account UBS. (“IRS”). Service enue April government indicted former UBS Bradley banker In February Birkenfeld. only American tax- Warner was not 2009 it filed a one-count information help payer hiding assets UBS. With against quickly UBS executed a de- division, of bankers UBS’s cross-border prosecution agreement, ferred under offshore accounts to many opened others in- wrongdoing avoid U.S. taxes. One the bankers which UBS admitted volved this fraudulent scheme agreed to hand over information on certain Schumacher, Hansreudi who serviced War- U.S. offshore clients. Several months la- ner’s account. After UBS entered into a ter, brought charges Qualified Intermediary Agreement with against former UBS and Schumacher (which in 2001 created certain tax the IRS Jeffrey client Chernick. In August 2009 reporting obligations), Schumacher left to Schumacher himself was indicted. join another Swiss bank. time, At the same en- followed him. In late couraged tax-evaders come forward on and, traveled to Switzerland their own announcing IRS offshore help, his funds Schumacher’s transferred voluntary disclosure program March from UBS to Zuercher Kantonalbank (the “OVDP”). program, Under the (“ZKB”), a smaller Swiss bank without a taxpayers voluntarily who disclosed their significant presence. placed U.S. He offshore accounts could avoid criminal at ZKB in funds the name of a Liechten- taxes, interest, prosecution by paying back entity, “Molani stein shell Foundation.” penalties, including and 20% of the ac- he engage And instructed UBS “not to hand, peak count’s value. On the other any sort of communication with me re those who continued to hide their assets transfer,” but instead tó send all corre- heightened would face enforcement and ZKB, spondence to At Schumacher. War- penalties. Taxpayers severe had a six- grew ner’s account to over million. $107 28, September month window—until Warner did not disclose his offshore ac- (later extended) advantage take of the —to contrary, count to the On the he IRS. taxpayers OVDP. Thousands of were ad- reported on his annual tax returns that he program.2 mitted into the had no financial foreign account. And he government’s Warner was aware of the report pay did not or taxes on the interest UBS, investigation of assets, widely which was generated by income his offshore publicized, which to over and of Schumacher’s indict- amounted million $24.4 result, through 2007. govern- As says regretted ment. Warner that he his $5,594,877 in ment lost tax revenue —the open decision to the offshore account from second-highest among loss the former stuck; beginning but felt and that he prosecuted UBS clients who have been never withdrew or otherwise used the date. In funds the account. 2009 he contacted lawyer options, his to discuss his and his

In Department 2008 the of Justice lawyer Sep- told him about the OVDP. On program aggressively launched a com- 18, just tax program original bat offshore evasión.1 The tember before the 2009— generally http://www.justice.gov/tax/ pro- 1. See on the 2009 disclosure Information (last gram and its successors is available on offshore-compliance-initiative visited webpage http://www.irs.gov/uac/ 9, IRS's 2015). July 2009-Offshore-Voluntaiy-Disclosure- 9, (last 2015). Program July visited OVDP). As far as admitted’to the to enter he been applied deadline—Warner him, however, aware, pay- million are we $53.6 Unbeknownst program. investigation; penalty under FBAR already largest ment is the he was account in- his government has collected to date. Warner .obtained 2009, possibly from in 2008 or formation restitution be- both the paid investigation made pending UBS. sentencing hearing. his fore OVDP, IRM for the see ineligible agreed- an plea deal included (b) 9, 2004), 9.5.11.9(4)(a), (Sept. so of guidelines calculation. The base upon rejected application. million was fense level for a tax loss later, 2011, jury grand years Two 2T4.1(J). §§ 2T1.1 and 24 under USSG banking offshore subpoenaed Warner’s to add 2 levels under parties agreed subpoena, He resisted records. (b)(2) offense § 2T1.1 because the USSG ultimately comply. him to required means, subtract sophisticated involved Jury Special Feb. 2011 — 1 Grand Sub re un acceptance responsibility levels for 12, 2011, Sept. Dated poena 3El.l(a), more der USSG subtract — (7th denied, Cir.2012), cert. U.S. 3El.l(b) under USSG because Warner’s -, 185 L.Ed.2d 1064 133 S.Ct. guilty plea- prepare obviated the need to (2013). resulting in a final offense level trial — prior had no con of 23. Because Warner Guilty B. Warner’s Information victions, history category was his criminal Plea yielded advisory guidelines I. This government filed September 2013 the imprisonment. range of 46 to 57 months’ charging a one-count information table). (sentencing ch. Apt. See USSG in violation of 26 with willful tax evasion to the cal- Beyond stipulating alleged information 7201. The U.S.C. culation, plea agreement left each side $885,300 in evaded taxes argue free to for whatever sentence (1) by: excluding reported from his appropriate. deemed as- income the interest from his offshore (2) sets; tax fraudulently stating on his Sentencing C. account; and foreign return that he had no submissions, (3) pre-sentencing In their nei- Bank failing Report Foreign to file a of (an form), proposed “FBAR” ther side a sentence within the and Financial Account required by Secrecy range. the Bank Act and The re- guidelines implementing regulations, see 31 U.S.C. quested year incarceration “in excess of a § 5314. day,” and a a sentence well below the probation minimum. recommended The pled guilty to October Warner prison officer recommended a term of 15 part the one-count information. As of his argued that a sentence months. Warner agreement, he admitted to simi- plea also community service would probation with lar he misconduct from 1996 to which suffice, provide greater and that it would agreed un- constituted “relevant conduct” society. He offered to mentor benefit Sentencing der Guidelines Manual U.S. develop- in product students business and (Nov. 2012) (“USSG”). prom- He 1B1.3 high at three urban schools on Chica- ment full and a civil pay ised to restitution The of one of go’s president South Side. penalty $53,552,248 equal FBAR — detailing the schools submitted a letter in 50% of the maximum balance his off- (which ways help. could specific that Warner higher shore account in 2008 is 30% addition, approximately seventy people— than the he would have owed had associates, neighbors, employees, treating kidney stem cells for failure. business As foundations, and others who result, charitable she has met with leaders character-refer- knew Warner —submitted field, laboratories, toured and “altered the in his ence letters behalf. path of research.” sentencing hearing place The took on Another letter came from president 14, 2014, January Judge District before Fund, Hunger of the organi- Children’s sides, argument Kocoras. After from both needy zation serving children orphanag- pronounced the court Warner’s sentence es, areas, disaster-stricken and elsewhere. explained its decision. The court also years, Over thirteen Warner donated mil- issued a short written statement of rea- plush toys lions of valued at million $70 supplement explanation. sons to its oral and enabled numerous projects. charitable hearing transcript fifty-five The runs president generosity called Warner’s pages. “nothing amazing” “unprece- short of adopted findings court district dented” in thirty-plus years his in the non- presentence report agreed in the profit more, every sector. What “in guidelines range. the calculation of the instance,” noted, humbly he Warner “ha[d] impose But court a below- decided requested special that no efforts be made sentence based on “the nature publicly acknowledge philanthropy.” his and circumstances of the offense and the history and characteristics of the defen- letter, In a third the director of financial 3553(a)(1). dant.” 18 U.S.C. The court reporting for company called him was moved the letters submitted “the most I person benevolent have ever behalf, “quite which were differ- explained, example, met.” He from received typically ent” the letters Ty when Inc. broke million in annual $1 voluminous, in other were de- cases: sales, surprised employees tailed, “personal and revealed Warner’s equal year’s with an annual bonus to one qualities, which differ from those he mani- salary; he maintained his also sales team’s committing fested in the crimes he has rates, high making many commission admitted.” The court read several letters them millionaires. sake, brevity’s into the record. For The other letters that the district court only summary. give partial hearing read told similar stories. letter related that in 2012 One Diana, example, For in honor of Princess stranger stopped to ask for directions designed plush toy and donated Barbara, Her name was Santa California. profits million in to her memorial fund. $20 Vasilakos, holding and she was a Jennifer 18-year-old To a commemorate friend’s Jenny.” In “Parking fundraiser called cancer, son who had succumbed to Warner directions, him gave flyer addition to she Issy Bear mil- created and donated $2 explaining kidney that she suffered from profits lion in for cancer research. He money pay failure and needed to for an million to a in gave charter school Las expensive adult stem cell treatment. An Vegas; donated million to enable the $13 later, reading flyer, hour after Warner acquisition development park and of a full promised pay returned and to Westmont, Illinois; gave and million for $2 ($20,000). amount she needed He followed Japan. disaster relief in addition to through, generosity went further “[his] letters, these the court noted that dozens simply donating.” helped than He her actions, other more host of “describe[d] “raise awareness” and connected her with small, Mr. potential large others interested in the of adult which reflect on War- total percentage” of Warner’s consideration in small are entitled to ner and the “humiliation” He also suffered for him.” wealth. determining just prosecution.” War- “highly publicized of a that “Mr. The district court found War- old, criminal years prior had no ner was 69 kindness, generosity private acts ner’s view, and, history in the district court’s overwhelming.” are and benevolence any fur- extremely unlikely to commit was Moreover, long many place of them took court also noted ther crimes. The district he under investi- knew was before Warner civil lia- payment of his prompt found were “moti- gation; the court with the compliance plea and his bilities of intentions” and purest vated agreement. using [them] a view toward “without factors, the relevant Having examined quietly “done sentencing.” Most were “left to judge the district said it was now has judge, district who privately.” The them, them all and balance as weigh me to thirty the bench for more been on humanly candidly ... I He best am able.” “Never have I had years, then remarked: question” that it was a “hard admitted any case—white collar a defendant Warner, and that whether to incarcerate the level crime or otherwise—demonstrate he “struggled over it.” But the end he humanity and concern for the welfare good works found that Warner’s Mr. others as has Warner.” “trump[ed]” his misconduct and that “soci- also discussed the other The court him ety by allowing served will be best 3553(a) factors, acknowledged which it prison. outside of good continue his works” On the one “run different directions.” range was A sentence below the hand, emphasized the court the need “the fitting, explained, the court because law,” “dignity of the to treat maintain similarly situat- do not describe Guidelines similarly,” and to poor “the rich and defendants”; “very ed Warner recognized It deter other tax-evaders. itself had rec- unique.” a substantial amount of “hid well-below-guidelines ommended a sen- crime money” many years, the court commended approach tence—an goes to the [which] was “a serious one “quite reasonable.” ourselves.” The govern of how we essence The district court sentenced Warner government’s acknowledged court also subject to standard years’ probation, two tax evaders who had comparisons to other requir- condition special conditions and despite having sentences prison received community ing at 500 hours of ser- least Warner, though it tax losses than lower high schools vice the three South Side comparisons unhelpful because found the he had identified. The court also fined “very unique.” Warner was $100,000 maximum amount —the hand, the court found that On the other by 26 7201—and or- authorized U.S.C. only a “small fraction” Warner concealed pay him to costs. dered income and tried to come clean of his total timely appealed. The knowing him through “prior OVDP jurisdiction court had under 18 district to the his name had been submitted ju- appellate and we have U.S.C. Moreover, sense, in one [IRS].” § 1291 and 18 risdiction under 28 U.S.C. severely” ... already “punished been 3742(b). § U.S.C. over million— by paying of $53 history” fine in largest “the possibly Analysis II. paid have “more than he ever would that The contends Warner’s and included all of the he filed the returns because it does income,” admittedly only “a sentence is unreasonable though it was

855 3553(a)(2). § For the rea- tion. Id. The sixth factor is prison term. not include follow, disagree. that “the need to avoid unwarranted sentence sons disparities” among similarly situated de- starters, re- expressly no statute For 3553(a)(6). § fendants. Id. The others to send the district court quired available, types are: the of sentence sen- violated, 26 The law that Warner prison. statements, tencing policy and the need for 7201, impose § the court to permits U.S.C. (7). 3553(a)(3),(5), § restitution. Id. instead, And which it did here. a fine under 18 eligible probation Ultimately, it falls on the district § U.S.C. 3561. weigh court to and balance the various factors and to “make an individualized as to the dis up It was therefore appropriate presented.” sen sessment based on the facts trict court to select Gall, 50, 586; in accordance with the factors 18 tence 552 U.S. at 128 S.Ct. see 3553(a). § of factors is 52, One those U.S.C. at (viewing also id. 128 S.Ct. 586 “ev range of sentence established type the ery study case as a human unique the 3553(a)(4). § guidelines. the 18 U.S.C. failings mitigate, that sometimes some Booker, however, States v. After United magnify, times crime and punish the merely advisory. are 543 guidelines (citation omitted)). ment to ensue” The 738, 220, 245, L.Ed.2d 125 S.Ct. 160 U.S. 3553(a) § open-endedness of the factors 3553(a) (2005). analysis 621 While ample for the leaves room court’s discre a consideration of the begins still Wachowiak, tion. See United States v. v. it does not end there. Rita guidelines, (7th Cir.2007). 744, 748 Once 351, States, 338, 551 127 S.Ct. United U.S. 3553(c) sentence, § court chooses a re (2007). 2456, sen L.Ed.2d 203 The 168 judge open to “state in quires district im tencing judge may perfunctorily not imposing court the reasons” for it. The pre or even pose sentence long need not be exhaustive as explanation appropriate that such a sentence is sume re meaningful appellate as it “allow[s] States, v. given in a case. See Gall United perception :.. promote[s] view and 38, 50, 586, L.Ed.2d 552 128 S.Ct. 169 U.S. Omole, sentencing.” fair States v. United (2007). only is guidelines range 445 (7th Cir.2008) 691, (quoting F.3d 697 rough approximation “a of sentences 586). Gall, 50, at 128 S.Ct. U.S. 3553(a)’s objectives” achieve might free to select a sentence outside court is Rita, the “mine run of cases.” 551 U.S. at Kimbrough v. guidelines range, see 350-51, supplies It “the 127 S.Ct. 2456. States, 85, 91, 128 S.Ct. United 552 U.S. benchmark,” initial starting point and the 558, (2007), it must 169 L.Ed.2d 481 but Gall, nothing more. 552 U.S. at but explain support magnitude 128 S.Ct. 586. Molton, variance, States v. United next The district court must consider Cir.2014). (7th 479, 484 F.3d 49-50, the other factors. Id. a district court’s We review encompass- The first factor 128 S.Ct. 586. Gall, steps. choice of sentence two es “the nature and circumstances of both First, we assess U.S. S.Ct. history “the and charac- the offense” and proper court followed de novo whether the teristics of the defendant.” 18 U.S.C. Nania, 724 procedures. United States 3553(a)(1). The second demands sen- (7th Cir.2013). If the deci F.3d “sufficient, greater tence sound, then we procedurally sion below is necessary” the basic accomplish is “sub resulting ask whether the just purposes sentencing: punishment, deterrence, incapacitation, stantively and rehabilita- reasonable.” Id. Unlike

856 A. may presume ap- on Procedural Reasonableness sentencing judge, we within-guidelines sentence is peal that a government primarily While the takes Rita, 341, at 551 U.S. 127 reasonable. sentence, aim at the substance of Warner’s may presume But S.Ct. 2456. we it also claims in several footnotes the guidelines range the a sentence outside judge procedurally by district erred over Gall, 51, at 552 U.S. 128 3553(a) unreasonable. § looking two of the factors: Instead, we must decide wheth- S.Ct. 586. need to deter other tax-evaders and to justification is er the district court’s suffi- avoid unwarranted sentencing disparities. cient, Setting question aside the whether applying a deferential abuse of dis- government preserved argument, this see 40, 586; Id. at cretion standard. 128 S.Ct. Gordon, 1044, Harmon v. 712 F.3d 1053 Molton, at 743 F.3d 484. We will not (7th Cir.2013) (“[A] party can waive judgment substitute our for that of the argument by presenting only it in an unde Wachowiak, at district court. 496 F.3d - footnote.”), veloped reject it on the 751. For we are mindful that substantive merits. occupies range, reasonableness “a not a id.,

point,” sentencing judge and that “the 3553(a) § Failure to consider the position apply is in best adequately factors or to explain the choice 3553(a) § factors to the individual defen- can procedural amount to er Omole, dant,” 523 F.3d at 698. Gall, 51, ror. See 552 U.S. at 128 S.Ct. But “sentencing

586. court need not Thus, uphold we will a variant comprehensively discuss each of the fac (i.e., outside-the-guidelines) tors,” sentence so Villegas-Miranda, United States v. (1) 798, (7th Cir.2009), long reasoning as the district court’s 579 F.3d 801 or march evidence, fashion, “in through explic them checklist rests on reliable United States v. (7th itly articulating its Cir.2009); regarding conclusions England, 555 F.3d Shannon, one,” (2) each United States v. Molton, 3553(a), is consistent with (7th Cir.2008). F.3d (3) 484; yields F.3d at a sentence range objectively “within the broad rea The district court here addressed circumstances,” sonable sentences 3553(a) explained factors and their Wachowiak, 496 at F.3d 750. A variant sentence, exactly relevance to Warner’s as likely pass sentence is most muster if it supposed particular, to do. In particular is based on considerations to the court expressly addressed both deterrence case, opposed defendant or the to “nor (which sufficient) it found sentencing mal judge’s incidents of the offense or the disparities (finding variety compar “the disagreement guide wholesale with the isons unhelpful made both sides” be Wachowiak, lines.” F.3d “very unique”). cause Warner was general, á disagreement about much how government’s complaint real is that 3553(a) weight give each factor does not, view, adequate district court did in its Molton, not warrant reversal. See 743 ly arguments. address its But that issue 485; F.3d accord United States v. Fer goes to the substance of Warner’s sen nandez, (2d Cir.2006) matter, tence. procedural As a the court’s (“The weight to any given be afforded explanation was more than sufficient. argument pursuant made to one of the B. Substantive Reasonableness firmly factors is a matter com

mitted to the discretion of sentencing brings That us to the heart of this judge....”). appeal. begin We our review for substan- by 1. stating tive reasonableness the obvious: Characteristics the of Defendant guide- well sentence is below 3553(a)(1) Section instructs the recommendation. He received both a lines sentencing judge to consider “the history (24 rather than 46 to 57 shorter and characteristics of the defendant.” A months) lighter (probation and a one rath- defendant’s of charity may justify record above, prison). Although, er than as noted lenient Though sentence. our earlier eligible probation Warner was under 18 required cases “exceptional” works, good 3561, § im- guidelines U.S.C. advised United States v. Repking, 467 F.3d prisonment probation rather than due to (7th Cir.2006) curiam), (per the Su length sentencing range. of his See preme “rejected] Court has since ... an 5Bl.l(a). USSG appellate requires rule that ‘extraordinary’ must decide whether the district We justify circumstances to a sentence outside justifies explanation court’s Warner’s sen Gall, range,” Guidelines at U.S. tence, including magnitude of its devia 128 S.Ct. Accordingly, to survive ap Molton, guidelines. tion from the review, pellate good defendant’s works disputes F.3d 484. No one that he justify must be sufficient to the variant below-guidelines deserved a sentence. sentence, necessarily need not be dispute The centers instead on how far exceptional. below the the court should have gone. requested probation. The Relying mainly on Warner’s letters of government proposed year over a and a support, the district court found his chari- day in prison would have made —which table generosity they works and the be- credit, eligible good-time likely speak overwhelming indeed, unprece- — reducing his actual time served less judge’s dented the district experience. 3624(b)(1). year. than a See 18 U.S.C. primary This was the mitigating factor strictly by While the court was not bound that drove the court toward a lenient sen- recommendations, their it was well within government tence. The attacks the court’s range the court’s discretion to use that grounds. assessment on two Gall, 49-50, a benchmark. See 552 U.S. at First, (directing questions 128 S.Ct. 586 the court to the val deter “sup many mine whether the factors ue of Warner’s letters because ” port requested the sentence party them came from his employees, former added)). (emphasis associates, real choice before employees, business and attor court, then, pro the district was between neys; and good because some of the deeds roughly year bation and in prison they report place took after Warner knew —not 46 to 57 months. investigation. he was under But the dis trict court It points. addressed both noted reasonably

Did the district court choose yet the source of the letters and found govern- between those alternatives? The specifi them sincere and credible. And says argues ment no. It that in analyzing cally generosity found that Warner’s went 3553(a) factors, nu- court made many years, back motivations ultimately put merous errors and much too sincere, trying were and that he was not weight on Warner’s charitable contribu- system or create a (factor game record use 1), support tions and letters of us, sentencing. Given the record before too little weight on the seriousness of his (factor 2(A)), findings clearly offense these are not erroneous. general deterrence (factor Gordon, 2(B)), sentencing disparities See United States (factor 6). (7th Cir.2008). address each in turn. We factor challenge government was free to

Second, argues that to no more than the district court’s assessment Warner’s charity amounts below, in- donating excess will not disturb “writing checks character but we [and] “nothing unique” consid- ventory,” findings appeal. is As we which the court’s on Though wealth.” above, support his “enormous ering they ample have stated million, says he donated clearly $140 Warner erroneous. the record and are worth, government his net the about 8% of by placing court err as Nor did the district million, is figure the correct asserts charac- weight much as it did on Warner’s The govern- his net worth.3 2% of about might giv- ourselves have Though ter. we dispute below a foot- raised this ment weight compared less en this factor understandably note, court so the district others, court did not abuse its discre- the it. did not resolve Gall, 51, 128 tion. See 552 U.S. at S.Ct. (“The court appellate fact that the be, figure may the the correct Whatever reasonably have concluded that might point misses the of the district in- appropriate is different sentence was Although praised War- remarks. court’s district justify of dol- sufficient to reversal of the giving away many millions ner for (com- Fernandez, court.”); lars, not focus on the number at 32 the court did F.3d wrote or their dollar the mitting assignment weight of checks Warner the on what It focused instead War- sentencing judge’s amounts. factors to the discretion). acts reveal about his char- ner’s charitable 3553(a)(1) acter, exactly is what which with the Our conclusion is consistent example, For us to consider. directs Repking by government, cases cited from Ms. court read Vasilakos letter Vrdolyak, 593 F.3d and United States v. entirety, though and in its even first (7th Cir.2010). Repking, we vacat- $20,000 donated for her treatment Warner substantively ed as unreasonable below- relatively was a small sum. What one-day a bank sentence for helped that Warner a to- remarkable was misappropriated funds. 467 president who stranger “generosity that his went tal judge’s F.3d at 1091-92. The district off- court simply donating.” further than ‘good “unspecified handed reference to insistence that highlighted also Warner’s ” “entirely consistent works’ that were publicize Hunger Fund not Children’s development plan” with a bank’s business as well as Warner’s kind- philanthropy, leniency. justify did not such Id. employees. to his None of the court’s ness among 1096. This case is different: other money on the amount of comments fixated facts, mitigating specified the district court involved. struck the court was What with reference to the record what detail displayed “humanity such and con- good works did and what cern for the welfare of others” and acted him The court person. revealed about as a intentions,” purest with “the often found, moreover, that was moti- Matt. “quietly privately.” 6:3— Cf by genuine benevolence rather than vated 4(RSV) (“[W]hen alms, you not let give do ulterior aims. your your right left hand know what hand below-guide- Vrdolyak, we reversed doing, your may alms be so secret.”) conspiracy sentence for probationary lines which, according figure value includes donations for 3. Warner’s includes retail also charities; him, tax toys he did not claim deductions on his he donated returns; government's figure toys valued at their does not in- claims those should be figure the defendant. clude those additional donations. actual cost to fairly to commit mail and wire fraud. 593 F.3d lenient approach to punish- The defendant there had “a histo- 684. ment. It charged him a single count misconduct,” ry of ethical but the district of tax evasion for a single year and elected it; ignored court it also overlooked the to treat years his conduct in the other as Warner, Id. at defendant’s wealth. sentencing relevant purposes rather contrast, history apart a clean from has charge than to them separate crimes. evasion, his tax and the court rec- district Additionally, above, as we noted gov- ognized both his crime and his wealth. sought ernment a sentence well below the Moreover, Vrdolyak proce- because was a guidelines range. Both decisions were challenge, expressed dural “no view on within government’s prosecutorial dis- proper awhat sentence would be.” Id. at cretion, second-guess and we do not them. precisely question 684. But that is But started the district court down a now; Vrdolyak speak before us does not to path leniency. toward it. It was reasonable for the district court allowing Nor are we to use his path follow that here. For a sentencing card,” “getout-of-jail wealth as a id. at judge only must consider not the serious- the government charges. as The district ness but also the “nature and circum- court looked behind the numbers War- stances of the offense.” 18 U.S.C. ner’s character and found him to abe 3553(a)(1). § The court noted several mit- genuinely person. benevolent A non- igating circumstances in Warner’s case. wealthy defendant who showed similar His crime was isolated and uncharacteris- qualities would be entitled to similar treat- kept only tic: he had one offshore account (all being equal). ment else And a rich (about 6%) containing “a small fraction” of gave large gifts defendant who without old, his total years wealth. He was 69 others, real concern for or who did so prior history, no criminal posed no cynically give argument himself an danger to society. particular, the court sentencing, would not deserve the same found, “no question there was of him vio- leniency. lating the tax laws in the future.” More- over, cooperated by pleading guilty he 2. Seriousness of Offense promptly paying both full restitution and Section demands “a sentence true, the FBAR penalty, although, it is his sufficient, greater necessary, but not cooperation incomplete (e.g., he resist- comply purposes” with the of sentenc- government’s subpoena ed the and did not ing. purposes One of those “to is reflect assets). disclose the source of his offshore offense, the seriousness of the to promote law, respect provide just for the and to The district court also appropriately 3553(a)(2)(A). punishment.” 18 U.S.C. took into account attempt Warner’s to en- recognized The district court here War- September ter the OVDP in It is ner’s crime as “a serious one” and respect true already that Warner knew about the According for the law as “fundamental.” investigation UBS in- Schumacher’s however, government, to the this was mere dictment, so he was on notice of some service, lip for Warner’s sentence does not probability that his own account would be justly punish convey him or the serious- mitigating discovered. That lessens the of evading ness million in taxes. attempted force of his disclosure but does case, Many justice

In another eliminate it. other offshore- might demand a sentence, notice, similarly harsher but here it accountholders were on does not. To with, begin given widely publicized prosecu- itself took a the IRS’s res- efforts; payment on yet many part the defendant’s and enforcement tions SEC). to the penalty titution and a civil eventually into the admitted them were fact, in the The salient anyway. OYDP downplay now tries to view, that came district court’s claiming repre- it penalty, FBAR knew the IRS had forward he before liability of the he only sents a fraction investigation. or that he was under name According government, to the faced. a miti to consider this It was reasonable charged separate could have Tenzer, gating fact. United States Cf. his account. year for each he hid (2d Cir.2000) (treating 42-43 statute, assuming Even relevant attempt failed mitigating defendant’s 5321(a)(5)(C)-(D), allow would U.S.C. voluntary pro an IRS disclosure to enter six-year lim- separate penalties, annual gram). restricted the period itations would have recovery maybe to two or government’s circumstances, proba- we think In these 5321(b)(1). years. three 31 U.S.C. See sufficiently serious sentence. tion was addition, government would have inus Gall Supreme Court reminded violations were prove had to involves a “substantial re- probation 5321(a)(5)(C). Moreover, if Id. willful. freedom,” court and faulted the striction insufficient, govern- million were discounting $53.6 that fact. 552 U.S. for below more ment could have insisted on before 48, years For War- 128 S.Ct. 586. two entering plea agreement. into the on his ner will live under restrictions activities, per- and he must movement and Gall, out, citing government points The community of ser- form at least 500 hours qualitatively are that “custodial sentences fíne, Moreover, $100,000 paid he a vice. probationary than sentences severe more possible amount for a violation highest 48, 552 128 equivalent of terms.” U.S. § 7201. of 26 U.S.C. true, That is and in that sense S.Ct. 586. stronger message incarceration sends addition, full restitution paid 3553(a) § than does. But does probation penalty. FBAR Tech- and a million strongest not command courts to send the penalty FBAR is civil rather nically the them to message possible; commands than criminal in nature. See 31 U.S.C. “sufficient, that is impose sentence same con- § But it stems from the ” greater necessary the circum- conviction; fact, criminal duct as his § stances of each case. 18 U.S.C. FBAR government specifically cited his added). con- (emphasis The district court in the information as of violations evidence probation- cluded that case a Further, criminal tax evasion. his That ary sentence met that standard. penalty part plea FBAR was of Warner’s conclusion was reasonable. cir- agreement. It is therefore one of the of cumstances that informs our assessment 3., Deterrence General adequacy. his sentence’s USSG Cf. 5E1.2(d)(5) court, of important goal Another sen (instructing the when fines, adequate [general] “to “any tencing collat- afford determining consider conviction, to criminal conduct.” 18 consequences including of deterrence eral 3553(a)(2)(B). crim White collar obligations arising from the defen- U.S.C. civil conduct”); gen “prime v. inals seem like candidates dant’s United States (11th deterrence,” Anderson, 847, Peppel, v. 850 eral United States Fed.Appx. 267 (6th Cir.2008) curiam) Cir.2013), because 707 F.3d (per (upholding proba- rationally, act calculat- trading they (presumably) tionary sentence for insider based penalty multiplied by prob the risks and the re for a crime ing comparing deciding engage ability whether to apprehension equals before the harm wards activity. case, thus in criminal done—in this the taxes evaded. See violating from “deterring DirecTV, Barczewski, make others Inc. v. 604 F.3d consideration.” primary (7th Cir.2010) tax laws ... 1004, 1010 (citing Gary S. intro, 2T1.1, cmt. And seek USSG Becker, Crime An and Punishment: Eco of offenders who proportion to increase the Approach, nomic 76 J. Pol. Econ. 169 pre-guide- above prison receive sentences (1968)); Rogan, United States v. 517 F.3d 2T1.1, cmt. lines levels. See USSG (7th Cir.2008) (citing A. Mitchell (background). Although guidelines’ Shavell, Polinsky and Steven Punitive controlling, see policies are not United Damages: Analysis, An Economic (7th Bonner, 440 F.3d States v. (1998)). L.Rev. If prospect Harv. Cir.2006), quarrel have no with the severity of punishment high are proposition that effective deter general enough, then of tax the risks evasion ex requires a credible rence of tax crimes rewards, ceed the and so would-be offend States imprisonment. threat of United Cf. (at in theory). ers will refrain least (7th 1144, 1149 Cir. Heffernan, penalty Warner’s FBAR 1994) significant the need for (recognizing nearly ten times the size of the tax loss he compensate for the rewards penalties (not interest). accounting caused difficulty detecting economic missing probability ap variable is the crimes). But that does not necessitate prehending the offshore tax-evader. Even every case. imprisonment figure, though, without that it is reason incarcerating Warner undoubted- While think, did, able to as the district court ly stronger message, sent a would have a tenfold is sufficient in Warner’s is, in message existing sent Congress apparently case. intended view, satisfy strong enough our effect, penalties FBAR to have a deterrent 3553(a)(2)(B). § We reach this conclusion 5321(a)(5)(C), § see 31 U.S.C. and it has First, dis- for two reasons. the veteran employed multiples lower than ten to stem of a judge trict found Warner be one harm, see, types e.g., other of economic definition, very kind. Almost few de- § (authorizing damages U.S.C. treble impression that kind of fendants will make violations); antitrust 18 U.S.C. sentencing judge. on a So Warner’s sen- 1964(c) (treble damages for RICO viola little, very anything, if tence tells others (treble 3729(a)(1) tions); 31 U.S.C. dam what treatment would receive about violations). ages for False Claims Act The other, particular, for a similar crime. penalty only fact that was 3% of Warner’s should take no typical more defendants not, government as the his net worth does fact that avoided comfort contends, For blunt its deterrent force. imprisonment. plays no role” in wrongdoer’s wealth “[t]he sentence, Second, prison even without a approach economic to deterrence out payment penal- Warner’s of a million DirecTV, lined above. 604 F.3d at 1010. ty already provides a measure of deter- government points The United States Sklena, rence. v. See United States Circuit, citing Engle, where the Fourth (7th Cir.2012) (recognizing F.3d that guidelines’ view deterrence re large penalty that a civil can have a “deter- incarceration, vacated quires a real risk of rent effect ... similar to that of a criminal sentence”). for tax evasion. probationary sentence point From an economic of (4th Cir.2010). view, Engle, deterrence is sufficient when “ because War- disagreed again, tax- trict court however, ‘mine-run’ best — unique. ner is at 503. The defendant Id. evasion case.” Warner, large there, pay did not unlike uphold the district court’s conclu- We unique characteristics possess or 3553(a)(6) forbids not all sion. Section low sentence. On the justify a that could only “unwar- sentencing disparities but Engle perhaps “could contrary, the facts simi- “among ranted” ones defendants with warranting an' above-Guide- be viewed guilty who have been found of lar records sentence,” (emphasis at 503 add- id. lines 3556(a)(6). conduct.” 18 similar U.S.C. ed), suggests one would have no which government’s is not similar to the here. appropriate been comparators. None of them offered evi- significant charity of or otherwise government takes issue dence Finally, per- the district court their impressed court’s with statement the district character, sonal as Warner did. None of prosecution highly publicized Warner’s them, exception Werdiger, with the provided some attendant humiliation paid tried to enter the OVDP or an FBAR argues that The deterrence. penalty comparable to Warner’s. Two of consequence of a a normal humiliation is them were convicted on numerous counts: prose- Warner’s conviction. While fraud case, Werdiger’s six in five in Hernandez’s. most, than public more cution has been And in all four instances the little, any, fact deserves if that this agree sought advisory a sentence within the at 1096. Repking, F.3d weight. See run” guidelines range.4 These were “mine transcript, read But as we Rita, cases. 551 U.S. at 127 S.Ct. significant role in played no humiliation 2456. Warner’s case is not. sentencing determination. court’s his sentence would stand any event And Furthermore, probation is a common it. without sentence offshore tax evasion cases. The evidence introduced below shows that Ip. Sentencing Disparities roughly half of the defendants convicted final contention is government’s proba- since 2008 received have terms creates “unwar- And, imprisonment. tion rather in violation of disparities” course, ranted sentence thousands more have avoided crim- 3553(a)(6). government points prosecution altogether by entering inal pris- clients who received government correctly empha- four former UBS The OVDP. day tax year pro- on of a and a with that the defendants sentenced to terms sizes than Peter Troost were different from for losses lower Warner’s: bation Warner: (who losses, million), they approximately example, evaded caused smaller tax $1 ($270,000), Christopher Berg gave Federico and several of them more information ($500,000), government. and Richard to the But are at least Hernandez Werdi- ($400,000). government’s compara- as the ger insists similar Zabczuk, prison example, that should have received a tors. Paul for tried to long through term at least as as theirs. The dis- disclose his offshore account Troost, Hernandez, 20); States v. No. 1:13-cr- United States v. No. 1:10-cr- See United 6, Ill.), (N.D. plea agreement (S.D.N.Y.), (ECF gov’t 00334-DC sent. mem. sent, (ECF (ECF 12), hr’g tr. at 26-30 No. 11), (ECF 12); No. judgment No. No. United (ECF 19); 23), judgment No. United States v. Werdiger, States v. No. 1:10-cr-00325-PGG (N.D. Cal), Berg, sent, 5:12-cr-00877-LHK No. (ECF 30), (S.D.N.Y.), judgment hr’g No. sent, (ECF 15), gov’t hr’g sent. mem. at 3 No. (ECF 31). tr. at 45-55 No. (ECF 27), (ECF judgment tr. at 50-53 No. No. released). OVDP, rejected, Here, was and received three commit if more con- despite government’s trast, years’ probation amply the record supports the dis- request prison for an 18-month sentence. trict findings. court’s factual Igor And Olenicoff hid millions of dollars We vacated the sentence in United accounts, paid in offshore the IRS $52 States v. legal Roberson because of a er- million, years’ probation and received two ror: imposed -district court a 1-month part “exemplary on his communi- based robbery sentence for bank avoid 84- ty service” and “humanitarian causes.”5 statutory month minimum on a related them, however, Both of caused much lower (7th firearm offense. 474 F.3d 433-34 tax losses than Warner. Cir.2007). A disagreement Congress Ultimately, examples prove these is not a give valid basis to a lenient sen- point: unique, district court’s tence. Id. at 434-35. No such impermis- comparisons very and neither side’s are sible considerations intruded into the result, helpful. As a his sentence does not here, court’s decision however. any disparities among cause unwarranted occasionally We have also vacated sen similar defendants. And for the same tences that obviously were or unreasonable reason, govern- it does not restrict arbitrary. In Goldberg, United States v. ability ment’s a prison obtain sentence the district gave one-day court other, cases, typical more even where pornography “idiosyn for child based on the tax loss issue is less Warner’s. penological cratic views” placed nearly that rehabilitation, emphasis exclusive on rath 5. Choice Sentence “careful, er than a impartial weighing of recognized district court that statutory factors”; sentencing we re various factors “run different (7th versed. 491 F.3d 673-74 Cir. up directions” and that it was to the court 2007). Ornóle, In gave the court a sen “weigh ... and balance them.” tence 51 months below the end, mitigating it concluded that the fac- range, “directly that result contra outweighed favoring tors the factors incar- finding the court’s that the defen dicted]” ceration, proba- so it sentenced “contempt dant the court” and tion. lack feeling “utter for other human be None of the errors that have led us to ings.” The court even told the defendant upend other sentences on substantive “you’ve caught a break that I’m not at grounds present England, are here. you all sure deserve.” These contradic example, the district court’s sentence compelled tions us to reverse. 523 F.3d at a purported finding rested on Repking, 698-700. And in we dis which attempted defendant would have to mur- above, grossly cussed the court overstated against der the witnesses him had he not impact unspecified of the defendant’s custody. been 555 F.3d at 621-22. good payments. works and restitution That nothing speculation, more than 1093,1095-96. F.3d at 623; so we vacated the sentence. Id. at contrast, By rationale the district court’s Bradley, see also United States v. (7th Cir.2010) curiam) (where specific here rests on facts about Warner (per any judge peculiar penological the rather theo- assumed the defendant had com- ry; fully mitted undiscovered crimes and would it is consistent with the sentence No, Zabczuk, (C.D. Cal.), coff, plea 5. See United States v. 0:10-cr- No. 8:07-cr-00227-CJC sent, sent, 4, 9, (S.D. Fla.), (ECF 11), hr’g agreement hr’g 60112-WPD tr. at at 4-5 No. tr. (ECF 35); 4-6, 8-9, (ECF 18). 22-23 No. United States v. Oleni at No. others; history charity and kindness to empha- factors the court and the imposed; (2) gave it them. uncharacteristic nature weight the isolated and sized bear the (3) evasion; attempt to enter of his tax his closely resembles Wa- case more' This (4) OVDP; plea prompt and guilty his a below- chowiak, we affirmed where (5) liabilities; payment of his receiving prison sentence nearly FBAR which is ten penalty, million on sharing pornography child based and (6) loss; fact that the times the tax by facts found the district mitigating only one charged him with any produced defendant never judge: remorse, well-below-guide- sought genuine count and itself images, showed him family support help sentence, to count on we conclude that Warner’s could lines addition, like through rehabilitation. probationary sentence is reasonable. record, Warner, had a clean “excellent” he (evidenced III. Conclusion by testimony and let-

character ters), a low risk of recidivism. not abuse Because the district court did “par- These factors were F.3d at 745-47. discretion, AFFIRM we its considerable to the individual circumstances ticularized sentence. Warner’s Id. at were Warner’s. of the case”—as though might we have been 750. Even FLAUM, concurring in Judge, Circuit harsher, concluded that the district judgment. range fell within the court’s decision judgment sep- I concur in the and write Id. at 754-55. reasonable sentences. my unease arately express to considerable Supreme Court’s decision Gall and the appeal with the outcome of this pled The defendant there also instructive. may how the signal that send about participation ecstasy in an guilty to limited wealthy justice system criminal treats tax ring. judge The district sen- distribution view, my evaders. Warner’s commend- years’ probation, well him to three tenced spirit able charitable does not obviate guidelines range of 3037 months below the of incar- appropriateness period of some 41-45, at prison. 552 U.S. S.Ct. purposely sought deprive ceration. He judge emphasized de- government of millions of dol- the federal history, significant fendant had no criminal simply of tax revenue to amass more lars voluntarily withdrawn from the con- Judge Koeor- of his enormous wealth. As spiracy, “doing everything and was in his it, put “go[] acts es- power forge new life.” Id. I govern of how we ourselves.” sence Additionally, a S.Ct. 586. “small flood” of and, therefore, wholeheartedly, agree War- good letters attested to his character. Id. regardless ner’s non-custodial sentence — Eighth 128 S.Ct. 586. The Circuit philanthropy of his me concern. —causes thought the crime demanded more seri- Nevertheless, Supreme ous sentence and reversed. The the sentence we review disagreed, holding that “the Court Court for an abuse of discretion. And imposed Appeals given should have due defer- sentencing deference we afford the ence to the District Court’s reasoned and here be informed the le- judge must fac- reasonable decision ap- niency with which the tors, whole, justified on the the sentence.” prosecution. Despite proached Warner’s 59-60,128 Id. at S.Ct. 586. evasion, govern- years of willful tax just with charge ment chose Due deference leads us to the same con- ' further, (1) Sentencing one count. And Considering clusion here. months, character, gov- long range Guidelines of 46-57 excellent as shown relatively recommended a modest ernment (“in of a of incarceration excess

period me, day”). and a For these two

year discretion, prosecutorial of debatable acts case, toward an affirmance this

point uniquely limiting context provided judge’s exceptional district exercise

for the leniency. backdrop, this I Without to vacate the sentence

would be inclined resentencing. and remand for

imposed

However, jurist’s light veteran

thoughtful thorough consideration of case, compelled I am to conclude that

Warner’s sentence falls within a sentenc- band of

ing judge’s broad discretion.

Gregory TAYLOR, Scott

Petitioner-Appellee America,

UNITED STATES

Respondent-Appellant.

No. 14-1269. Appeals,

United States Court of

Eighth Circuit. Feb. 2015.

Submitted: July

Filed: 2015.

Rehearing En Rehearing Banc Sept.

Denied

Case Details

Case Name: United States v. H. Ty Warner

Court Name: Court of Appeals for the Seventh Circuit

Date Published: Jul 10, 2015

Citation: 792 F.3d 847

Docket Number: 14-1330

Court Abbreviation: 7th Cir.