| NEW YORK
NEW YORK Aug 6 A lawyer for Texas businessman
Sam Wyly and his late brother Charles on Wednesday urged a U.S.
judge to reject the Securities and Exchange Commission's request
for as much as $750 million in damages for their role in a
fraudulent offshore scheme.
Stephen Susman told U.S. District Judge Shira Scheindlin
that the SEC's calculations were "overblown" and far beyond what
the Wylys were able to pay.
The argument came during a nonjury trial to assess how much
money the Wylys must pay the U.S. government after a federal
jury found them liable for fraud and other charges in May.
The SEC accused the Wylys of setting up a complicated system
of trusts in the Isle of Man that netted them $553 million in
profits through hidden trades between 1992 and 2004 in companies
The companies, on whose boards the Wylys sat, were Sterling
Software Inc, Michaels Stores Inc, Sterling Commerce
Inc and Scottish Annuity & Life Holdings Ltd, now Scottish Re
Lawyers for the SEC have argued that the regulator is
entitled to collect all unpaid taxes on the scheme's profits,
plus interest, because the Wylys' failure to disclose their
control of the trusts ensured tax authorities would not catch
But Susman said in court that the Wylys' nondisclosure did
not necessarily mean they owed taxes on the offshore trades
under federal tax law.
Lawyers for the Wylys have argued the appropriate penalty
should be $1.38 million, with no disgorgement of any unpaid
taxes or profits. If the judge decides to order disgorgement,
however, the maximum amount of profits that could be reasonably
tied to the lack of disclosure is $22 million, Susman said.
Charles Wyly's estate has $30 million in assets, while Sam
Wyly has $70 million as well as a $12 million annuity, according
The offshore trusts still hold hundreds of millions of
dollars, he said, but the money cannot be counted as the Wylys'
assets because there are additional beneficiaries.
The SEC originally sought $1.4 billion in damages, based on
every dollar of profit earned offshore, but Scheindlin last week
said the agency had not adequately supported that theory.
Sam Wyly, 79, last appeared on Forbes' list of the 400
richest Americans in 2010 with a net worth of $1 billion. His
brother Charles died in a car crash in 2011, and an executor for
his estate was substituted as a defendant.
The case is U.S. Securities and Exchange Commission v. Wyly
et al, U.S. District Court for the Southern District of New
(Reporting by Joseph Ax; Editing by Grant McCool)