* 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 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
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.