SEC Seeks $329 Million From Wylys in Illegal Trading Case 

Samuel Wyly and the estate of his brother Charles should pay $329 million for using offshore accounts to hide stock holdings and engage in illegal trading, regulators argued in seeking to increase the penalty ordered by a judge.

Wyly and the estate should pay that sum plus an undetermined amount of interest, a U.S. Securities and Exchange Commission lawyer told U.S. District Judge Shira Scheindlin in Manhattan today. In September, the judge found that the brothers must pay $187.7 million plus interest, which could push the amount to more than $300 million.

The bigger penalty, if accepted, could more than double what the agency is owed, according to court filings.

The penalty should be higher under an analysis taking into account the benefits the Wylys enjoyed from keeping their trades hidden from the investing public’s view, Bridget Fitzpatrick, an SEC lawyer, argued today.

“They could trade more aggressively because no one was looking,” Fitzpatrick said of the Wylys, who developed businesses including craft retailer Michaels Stores Inc. Charles Wyly was killed in an auto accident in 2011.

Chyhe Becker, an SEC economist testifying in favor of the revised figures, said it was “as if they had the equivalent of a cloak of invisibility” surrounding the securities they transferred to the accounts, making them more valuable than if they had been publicly known.

Widow’s Bankruptcy

The Wylys have argued they don’t have enough money to pay the lower award to the SEC. Both Samuel Wyly and Caroline Wyly, the widow of Charles Wyly, have sought bankruptcy protection.

A federal jury this year found the Wyly brothers engaged in fraud against investors for 13 years, making $550 million in illegal profit. The agency claimed they hid ownership of shares of companies on whose boards they sat and broke disclosure regulations by failing to reveal the full extent of their offshore holdings.

The case is SEC v. Wyly, 10-cv-05760, U.S. District Court, Southern District of New York(Manhattan).

Source: Bloomberg – SEC Seeks $329 Million From Wylys in Illegal Trading Case

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