| NEW YORK, April 22
NEW YORK, April 22 Texas businessman Sam Wyly
took the stand in his civil trial in New York on Tuesday and
denied U.S. Securities and Exchange Commission claims that he
and his brother used a complex network of offshore trusts to
conceal years of stock trades and net $550 million in
"Did you create these trusts in the Isle of Man to commit
securities fraud?" Wyly's lawyer, Stephen Susman, asked his
"No," the 79-year-old Wyly replied, his hand cupped to his
ear to aid his hearing.
The SEC has accused Wyly and his late brother, Charles Wyly,
of hiding stock trading from 1992 to 2004 in four companies on
whose boards they sat. It alleges the brothers hid the
transactions within a complicated structure of more than a dozen
trusts and 40 offshore entities. The companies involved are
Sterling Software Inc, Michaels Stores Inc, Sterling Commerce
Inc, and Scottish Annuity & Life Holdings Ltd.
Susman, however, has told the jury in Manhattan federal
court that the Wylys relied on an "army of lawyers" to advise
them on what they were required to do and never intended to
violate any laws.
Wyly's testimony will unfold in bits and pieces over the
next two weeks, because of an undisclosed medical condition that
allows him to testify for no more than two hours per day.
The unusual trial schedule means that jurors will hear
back-and-forth testimony from the star witnesses for both the
government and the defense over the next few days, with Michael
French, the Wylys' former family lawyer, appearing as an SEC
witness after Wyly finished for the day.
During Tuesday's testimony, Wyly did not deny the
government's contention that every stock transaction made by the
trustees was based on a recommendation from the brothers. He
also agreed that the brothers created numerous trusts to make
sure no single trustee owned more than 5 percent of the voting
shares for any one company, thereby minimizing SEC filing
Wyly said he would have disclosed the transactions in full
from the start if he could do it over again but said he was not
an expert in securities law and simply followed the advice of
his lawyers, including French.
French was a defendant in the case until March, when he
struck a deal with the government to pay $794,609, admit
wrongdoing and testify against the Wylys.
Charles Wyly died in a car accident in 2011. His estate has
been substituted as a defendant in the case.
French told jurors he had helped the brothers take control
of the trusts in order to conceal their stock trading from the
public, including regulators.
He said that Wyly contacted the trustees himself and told
them to make specific transactions, rather than following the
process set up in the trust documents.
"He was not supposed to do that," French said.
French, a former partner at the law firm Jackson Walker, was
guaranteed at least $1.5 million in annual compensation by the
mid-1990s working for the Wylys, according to French's
The trial, which followed several years of investigations by
the government, began on April 3 and is expected to last
approximately two months.
The case is SEC v. Wyly et al, U.S. District Court, Southern
District of New York, No. 10-05760.
(Editing by Matthew Lewis)