* Louis Schaufele to pay $498,693 in final SEC settlement
* Wylys accused of hiding sale proceeds, insider trading
By Jonathan Stempel
NEW YORK, Jan 8 (Reuters) - A stockbroker for the wealthy Texas investors Samuel and Charles Wyly agreed to pay $498,693 to settle regulatory charges that he assisted in the brothers' alleged $550 million fraud and conducted insider trading, settlement papers made public on Wednesday show.
Louis Schaufele, the stockbroker, is the first of the four defendants named in the U.S. Securities and Exchange Commission's July 2010 lawsuit against the Wylys to settle with the regulator, court records show.
Charles Wyly died in an August 2011 car crash, and an executor for his estate was substituted as a defendant.
The SEC accused the Wylys, who were large donors to charitable and conservative causes, of creating a series of offshore trusts to hide stock sales from 1992 and 2004 in four companies they founded or where they sat on the board.
According to the regulator, the Wylys created these trusts in part to avoid sending bearish signals to investors.
The SEC also accused the Dallas-based brothers of insider trading, saying they reaped $31.7 million from trades in Sterling Software Inc after deciding in 1999 to seek a buyer.
Schaufele, meanwhile, was accused by the SEC of using his position as the Wylys' stockbroker to conceal from his supervisors the brothers' control over securities held offshore. The SEC also alleged that Schaufele committed insider trading in Sterling Software through his wife's accounts.
According to final settlement papers filed with the U.S. District Court in Manhattan, Schaufele agreed to give up $269,009.55 of ill-gotten gains plus $229,683.55 of interest. He did not admit or deny wrongdoing.
Brokerage records of the Financial Industry Regulatory Authority show that Schaufele worked at Credit Suisse First Boston, Lehman Brothers and Bank of America during the period of the Wylys' alleged fraud.
He later worked at Stanford Group Co, which was overseen by now-imprisoned swindler Allen Stanford, and more recently at JPMorgan Chase, the records show.
Martin Auerbach, a lawyer for Schaufele; William Brewer, a lawyer for Samuel Wyly; Mark Hatch-Miller, a lawyer for the executor of Charles Wyly's estate; and Kevin Callahan, an SEC spokesman, were not immediately available for comment.
The fourth defendant is Michael French, a lawyer for the Wylys.
Credit Suisse, Lehman, Bank of America, Stanford and JPMorgan were not named as defendants in the SEC case.
The case is SEC v. Wyly et al, U.S. District Court, Southern District of New York, No. 10-05760.