Two Texan tycoons fraudulently netted $550m by creating a maze of trusts in the Isle of Man to conceal their transactions in four companies they controlled, a jury found.
Jurors in Manhattan federal court found Samuel Wyly and the estate of his late brother Charles liable on all claims brought by the US Securities and Exchange Commission (SEC), in the regulator’s largest case to go to trial in recent years.
Samuel Wyly, 79, last appeared on Forbes’ list of the 400 richest Americans in 2010 with a net worth of $1bn. Charles Wyly died in a car crash in 2011.
The civil trial followed years of litigation and investigation by the SEC and other authorities into the Dallas billionaire brothers.
The Wylys denied wrongdoing, contending they were not legally the beneficial owners of securities held in the trusts and had no duty to disclose them.
Stephen Susman, the Wylys’ lawyer, said in a statement: ‘We are deeply disappointed by the jury’s decision. Sam and Charles Wyly acted in good faith. We will continue to fight for justice through the next phases of the legal process.’
The SEC said the trusts were designed to conceal trading from 1992 to 2004 in four companies on whose boards the Wylys sat.
They included Sterling Software Inc, Michaels Stores Inc, Sterling Commerce Inc and Scottish Annuity & Life Holdings Ltd, now called Scottish Re Group Ltd. The SEC said the scheme netted $550m.
The SEC also contends the Wylys earned $31.7m from insider trading in Sterling Software after selling the company in 1999. Those claims will be decided by US District Judge Shira Scheindlin, who also will determine the penalties. A trial on remedies is scheduled for August 4.
Samuel Wyly was in Texas rather than the New York court on Monday. One of Charles Wyly’s daughters could be seen crying as the verdict was read.
Andrew Ceresney, director of enforcement at the SEC, said: ‘We will continue to hold accountable, and bring to trial when necessary, those who commit fraud no matter how complex their scheme or how hard they try to hide it.’