SEC Seeks $1.41 Billion from Wyly Brothers For Fraud
The Securities and Exchange Commission is seeking damages totaling $1.41 billion from Texas tycoon Sam Wyly and the estate of his late brother Charles for their role in a plan to conceal trades in companies they controlled by using a network of offshore trusts, Reuters reports.
In a court filing submitted by the SEC late on Friday, the agency said the amount was justified after a jury in New York federal court found that the pair committed fraud by reaping $553 million in profits over a 13-year period and failing to disclose that to investors in the companies.
“It is time to hold the Wylys accountable,” the SEC wrote, according to Reuters. “It is time to strip away the immense profits that flowed from their misconduct. It is time to impose the maximum penalty allowable under the securities laws.”
The agency argues that Sam Wyly, 79, should be made to disgorge $371.1 million in profits plus $528 million in interest and a penalty of $72.3 million.
He should also be subject to an injunction, the SEC said. The estate of Charles Wyly should be made to disgorge $182 million in profits plus interest of $260.6 million. Charles Wyly died in a car crash in 2011, and an executor for his estate was substituted as a defendant, Reuters reports.
Lawyers for the Wylys claim in their court filing that the SEC failed to demonstrate that the pair’s actions caused any harm to investors, according to Reuters.
In May, a federal jury presided over by U.S. District Judge Shira Scheindlin in New York found the defendants guilty of nine counts of committing fraud by using offshore trusts and subsidiary entities in the Isle of Man to conceal stock sales from 1992 to 2004 in four companies on whose boards they sat: Sterling Software Inc., Michaels Stores Inc., Sterling Commerce Inc. and Scottish Annuity & Life Holdings Ltd, which is now called Scottish Re Group Ltd.
But earlier this month, Scheindlin found that the brothers were not liable for insider trading. Scheindlin said that the SEC failed to demonstrate that the Wylys’ desire to sell Sterling Software, a company they controlled, equated to material knowledge that could form the basis for insider trading, according to Reuters.
Scheindlin will preside over a non-jury trial on Aug. 4 to assess damages related to the May verdict finding. She will consider the SEC’s recommendations at that trial, Reuters reports.
Source: americanlawyer
