SEC charges billionaire Texas brothers who donate to GOP with fraud
Friday, July 30, 2010
Sam and Charles Wyly, billionaire Texas brothers who gained prominence spending millions of dollars on conservative political causes, committed fraud by using secret overseas accounts to generate more than $550 million in profit through illegal stock trades, the Securities and Exchange Commission charged Thursday.
The Wylys, who have been generous contributors to the Republican Party and GOP candidates, have spent the past several years facing questions, including from a Senate investigative committee, about whether they hid millions of dollars in tax shelters abroad.
Through their lawyer, the Wylys denied all charges.
According to the SEC, the brothers, who live in Dallas, created an elaborate and clandestine network of accounts and companies on the Isle of Man and in the Cayman Islands. The brothers then used these accounts and companies to trade more than $750 million of stock in four public companies on whose boards they served, not filing the disclosures required for corporate insiders, the SEC said.
In one case, the SEC alleges that the Wylys traded based on insider information they learned as board members, netting a profit of $32 million.
"The cloak of secrecy has been lifted from the complex web of foreign structures used by the Wylys to evade the securities laws," Lorin L. Reisner, deputy director of SEC enforcement, said Thursday in a statement announcing the civil charges.
The agency is seeking unspecified financial penalties and a variety of other sanctions, including barring the Wylys from serving as directors or top executives of public companies.
William Brewer III, a lawyer representing the Wylys, said they intend to clear their name.
"After six years of investigations, the SEC has chosen to make claims against the Wyly brothers -- claims that, in our view, are without merit," Brewer said in a statement. "It will come as little surprise to those who know them that the Wylys intend to vigorously defend themselves -- and expect to be fully vindicated."
Charles Wyly, 76, and Sam Wyly, 75, have led a largely reclusive life, with their public persona defined by their political activities. Charles Wyly and his wife, Dee, have given more than $1.5 million to more than 200 Republican candidates, party committees and conservative political action committees over the past 20 years, according to an analysis by the Center for Responsive Politics. Sam Wyly and his wife, Cheryl, gave more than $970,000 over the same period, the analysis shows.
The Wylys have given to dozens of Republican candidates, none more so than the Bush family. The brothers were supporters of the campaigns of former President George H. W. Bush and his son, former President George W. Bush.
In 2000, the Wylys financed a third-party group, Republicans for Clean Air, that launched a television advertising broadside against George W. Bush's chief opponent, Sen. John McCain (R-Ariz.), on the eve of crucial GOP presidential primaries. Later that year, the brothers each gave $100,000 to fund Bush's inaugural festivities.