(Adds SEC comment, juror interview, details on further
By Nate Raymond
NEW YORK May 12 A jury on Monday found that
Texas business brothers Samuel and Charles Wyly committed fraud
by creating a secret scheme involving offshore trusts that
netted them $550 million in illegal trading profits.
Jurors in Manhattan federal court found Samuel Wyly and the
estate of his brother liable on all claims brought by the U.S.
Securities and Exchange Commission, in the regulator's largest
case to go to trial in recent years.
Samuel Wyly, 79, last appeared on Forbes' list of the 400
richest Americans in 2010 with a net worth of $1 billion.
Charles Wyly died in a car crash in 2011, and an executor for
his estate was substituted as a defendant.
The trial followed years of litigation and investigation by
the SEC and other authorities of the Wylys, who acknowledged
creating a maze of trusts in the Isle of Man in an effort to
obtain tax benefits.
The case was seen as a test of the SEC's trial capabilities
following losses in some of its recent cases, including a
verdict in which billionaire Mark Cuban was found not liable
last October on insider trading charges.
"We are deeply disappointed by the jury's decision," Stephen
Susman, the Wylys' lawyer, said in a statement. "Sam and Charles
Wyly acted in good faith. We will continue to fight for
justice through the next phases of the legal process."
The SEC said the trusts were designed to conceal trading
from 1992 to 2004 in four companies on whose boards the Wylys
sat. They included Sterling Software Inc, Michaels Stores Inc,
Sterling Commerce Inc and Scottish Annuity & Life Holdings Ltd,
now called Scottish Re Group Ltd. The SEC said the scheme netted
The SEC also contends the Wylys earned $31.7 million from
insider trading in Sterling Software after selling the company
in 1999. Those claims will be decided by U.S. District Judge
Shira Scheindlin, who also will determine the penalties. A trial
on remedies is scheduled for Aug. 4.
The Wylys denied wrongdoing, contending they were not
legally the beneficial owners of securities held in the trusts
and had no duty to disclose them.
Samuel Wyly was in Texas rather than the New York court on
Monday. One of Charles Wyly's daughters could be seen crying as
the verdict was read.
The 12 jurors deliberated over 2-1/2 days. Kevin Rothman, a
retired letter carrier, said one juror had been a holdout until
ultimately convinced the Wylys did not have a viable defense.
"We couldn't see it, we couldn't find it," he said.
Andrew Ceresney, director of enforcement of the SEC,
welcomed the jury's findings.
"We will continue to hold accountable, and bring to trial
when necessary, those who commit fraud no matter how complex
their scheme or how hard they try to hide it," Ceresney said in
The case is SEC v. Wyly et al, U.S. District Court, Southern
District of New York, No. 10-05760.
(Editing by Noeleen Walder and Grant McCool)