Did Ty Warner have a motive to commit tax evasion of did he make an understandable mistake?
It’s very questionable. A billionaire is not the type of person who commits tax evasion. Billionaires don’t need to evade taxes. They truly have more money than they can spend. Further, there is far too much risk relative to return on investment when evading taxes – it’s a foolish way to gamble with money and liberty. I suppose that he could have been evading taxes for the thrill of it, but this does not fit the character of a person with his philanthropic record.
People who commit tax evasion are people who are taking financial short cuts to attain wealth. However, in my experience, tax evaders are really bad at maintaining wealth. They might have a few million dollars one day, but in short time the money is often lost or squandered.
The indictment and conviction of Warner was intended to scare the public in to paying their taxes. The government leveraged Warner’s fame to get the American public fearful and respective of an all-mighty tax system.
So then why did he plead guilty, rather than go to trial?
From what I can garner, his tax advisors made a mistake. His tax team seemed to be local advisors that he trusted; whom grew as he grew. I suspect, that they had poor expertise in international reporting, and that the government saw an opening to attack someone very famous and to leverage his fame into awareness of international taxation and foreign bank reporting.
I can tell you from my own experience as an international tax attorney, that it is incredibly common to find good tax practitioners who make big mistakes on foreign reporting. International taxation is complicated and very different than domestic taxation.
Warner could have gone to trial and hoped to prove a lack of willful intent, and I think a good criminal defense attorney could have gotten him acquitted. But, there’s two problems when one goes to trial. First, there is a possibility of acquittal, but a good chance that one could lose big. Second, in order for Warner to prove his innocence at trial, he would need to provide dispositive evidence that his tax team dropped the ball. Which could precipitate criminal charges to his tax team. My guess is that Warner reasoned that he could absorb the far arrows better than the people he looked at as essential into making him a billionaire. Therefore, Warner plead guilty, paid restitution and penalties, received two years of probation, and fortunatley never had to serve a day inside of a prison cell.
The important lesson: There are different tax rules for celebrities and for others with some degree of fame. The IRS is desperate to gets its message out of how unreasonable it can be by attacking celebrities and those with some notoriety. Some Americans can evade taxes for years and have little to worry about. Those with a following can be charged even if they make an innocent mistake. Therfore, make sure your international affairs can withstand the most brutal IRS scrutiny.
