The Securities and Exchange Commission sued Dallas’ Wyly brothers Thursday, accusing them of a 13-year-long fraud that earned them profits of more than a half billion dollars.
The suit filed in New York culminates more than five years of investigation into Sam and Charles Wyly, two of North Texas’ biggest businessmen and charitable benefactors.
Also named as defendants in the lawsuit are the Wylys' investment attorney, Michael C. French of Dallas, and the stockbroker, Louis J. Schaufele III of Dallas.
The suit alleges the Wylys used off-shore accounts to shuffle money back and forth to evade securities laws. They also failed to disclose ownership of shares and used insider information to make trades that made them millions of dollars, the suit claims.
“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 the SEC’s Division of Enforcement, said in a statement Thursday. “They used these structures to conceal hundreds of millions of dollars of gains in violation of the disclosure requirements for corporate insiders.”
The lead counsel for the Wylys said the claims are without merit and are a "misapplication of the law."
"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," said William A. Brewer III, partner at Bickel & Brewer.
Messages left with French, Schaufele and their attorneys weren't returned Thursday.
While running Michaels, the arts and crafts stores, the Wylys disclosed in the past five years that federal grand juries had sent the company subpoenas related to an investigation of the Wylys' offshore accounting. The civil suit seeks multimillion-dollar financial penalties and asks the Wylys to return their profits.
The Associated Press contributed to this report.
