| NEW YORK, March 20
NEW YORK, March 20 A former lawyer for the
wealthy Texas investors Samuel and Charles Wyly agreed to pay
nearly $795,000 and admit to wrongdoing to resolve regulatory
charges that he assisted the brothers in a multi-year $550
million fraud, according to court papers filed on Thursday.
The settlement between the lawyer Michael French and the
U.S. Securities and Exchange Commission was disclosed just 1-1/2
weeks before jury selection was set to begin in the case. The
SEC has accused the Wyly brothers of using offshore trusts to
hide stock sales in four companies closely tied to them.
The accord marked the seventh time that the SEC has obtained
an admission of wrongdoing from a defendant as part of a new
settlement policy unveiled in June 2013 by SEC Chair Mary Jo
The SEC had previously disclosed in court that it engaged in
settlement talks with Samuel Wyly similarly demanding an
admission of wrongdoing, but no deal has emerged.
Charles Wyly died in an August 2011 car crash. An executor
for his estate was substituted as a defendant. Jury selection is
expected to begin on March 31.
Joshua Klein, a lawyer for French, declined to comment.
Lawyers for the Wylys did not immediately respond to a request
The SEC accused the Wylys in a 2010 lawsuit of using
offshore trusts and subsidiary companies in the Isle of Man and
the Cayman Islands to conceal the sale of more than $750 million
in stock sales over a 13-year period from 1992 through 2004 in
four companies they founded or served as members of the board of
Those companies were Michaels Stores Inc, Sterling Software
Inc, Sterling Commerce Inc and Scottish Annuity & Life Holdings
Ltd, now known as Scottish Re.
The SEC also accused the Dallas-based brothers of insider
trading, claiming they earned $31.7 million from trades in
Sterling Software after deciding in 1999 to seek a buyer.
ACTING 'INTENTIONALLY OR RECKLESSLY'
In his settlement, French agreed to give up $400,000 of
alleged illegal profit plus $394,609 of interest.
He also admitted to conduct related to activity that is part
of the SEC's case against the Wylys, for whom he began to work
in 1992 after leaving the law firm Jackson Walker.
According to an admission of facts signed by French, this
conduct "was undertaken by French in connection with the
purchase, offer, or sale of a security," and "French acted
intentionally or recklessly in connection with the violations
described (in the admission of facts)."
The SEC had accused French of using his positions as the
brothers' lawyer and as a director of three of their companies
to hide their ownership stakes and trading. The regulator also
accused French of using his positions to set up and trade in his
own offshore entities without proper disclosures.
Thursday's settlement is the second in the Wyly case.
A former stockbroker for the brothers, Louis Schaufele,
agreed to pay $498,693 in a settlement disclosed in
French is still expected to be a key witness at trial,
having helped establish the trusts at the center of the case
while in the Wylys' employ.
Lawyers for Samuel Wyly and the executor for Charles Wyly's
estate are expected to argue that they relied on the legal
advice of French in not disclosing ownership of the securities
held in the offshore trusts.
The case is SEC v. Wyly et al, U.S. District Court, Southern
District of New York, No. 10-05760.
(Editing by Jan Paschal)