Samuel Wyly, a prominent Texas businessman and the founder and former chairman of the Wyly Corp., yesterday was charged with failing to disclose to stockholders a series of payments to individuals who were helping raise money for his struggling company.
In a complaint filed by the Securities and Exchange Commission, Wyly was charged with arranging consulting contracts and other payments in exchange for the tender of Wyly's debentures.
Also named as defendants in the complaint are Raymond Shea, a Holden, Mass., businessman who owns stock in Wyly Corp., and Eldon Vaughan, a Wyly business associate.
During the late 1960s, Wyly, now 45, was considered one of a breed of Texas computer tycoons. He also headed President Nixon's Advisory Council on Minority Business Enterprise.
But Wyly's computer, energy services and insurance businesses, including Data Transmission Co. (Datran), a subsidiary based in Vienna, Va., ran into difficulty. Wyly Corp. had invested about $50 million in Datran, which, after losing $14 million in 1975 went into bankruptcy.
Although Wyly and Shea consented to the SEC's filing, they did so without denying or admitting the allegations. But they were enjoined by a federal court here from further violations of the antifraud provisions of the federal securities law.
Specifically, Wyly is charged with defrauding the corporation and lying and omitting certain facts in statements to stockholders and others connected with the company.
In August 1976, Wyly offered more than 4 million shares of the company's stock in exchange for the corporation's debentures. But the offer did not successfully raise the money the struggling company needed to continue operations.
After the company issued a second offering, Wyly met with Shea in an effort to convince him to tender his debentures under the second offer according to the SEC.
On Jan. 16, 1978, Shea told Wyly he would tender $2 million in these notes, in exchange for being paid double the amount offered to other holders of the notes. Wyly, instead, agreed to set up a "consulting agreement," under which Wyly would pay Shea $220,000 over 60 months, the SEC said.
But that agreement fell apart and Wyly ultimately offered about $400,000 to Shea to settle the deal, the SEC said. Later, another compensation agreement was worked out, but a Wyly Corp. director inadvertently opened the letter describing the deal and informed the SEC of its contents.
In another series of transactions cited by the SEC, Wyly was charged with failing to disclose another arrangement involving James J. Ling, another Texas computer whiz who was the founder of LTV Corp.
Ling, and his Alpha-Omega Corp., according to the SEC, borrowed $5.2 million from a Dallas bank in 1969, a loan insured by Gulf Insurance Co., then a Wyly Corp. subsidiary.
After a default in loan repayments, another Wyly Corp. subsidiary assumed the loan, in exchange for a promissary note. The transactions were later renegotiated and Wyly was charged with repeated failures to disclose the loan arrangements and renegotiations in proxy statements.