NEW YORK, April 22 (Reuters) - 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 undisclosed profit.
"Did you create these trusts in the Isle of Man to commit securities fraud?" Wyly's lawyer, Stephen Susman, asked his client.
"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 requirements.
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 testimony.
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)