Texas’ Wyly Brothers Ordered to pay More than $300M In Fraud Sanctions

A federal judge has ordered Texas businessman Sam Wiley and the estate of his deceased brother Charles Wiley to pay $187.7 million in disgorgement plus prejudgment interest-bringing the total sanctions to over $300 million for their involvement in an offshore scam. The brothers were found liable on civil securities fraud charges accusing them of using offshore trusts to conceal stock sales, resulting in $553 million in profits.

The U.S. Securities and Exchange Commission had wanted the Wylys to pay $729 million in sanctions, including for all unpaid taxes on the profits made from the scheme plus interest. The government said that the Wylys used their improper gains to buy $100 million in real estate and spent tens of million dollars on luxury spending and charitable donations.

Meantime, lawyers for the Wyly brothers argued that the trusts were established for estate planning and tax purposes but that the two men did not control them. Over 700 transactions were sold in four companies, none of which the two men disclosed in regulatory findings. The Wyly brothers were insiders in the companies involved.

According to court documented submitted by the SEC, after he was warned that the brothers’ stance regarding the trusts’ tax actions was high risk and aggressive for tax purposes, Sam Wiley says that if the internal revenue ever challenged him he was willing to go to court for years. A jury found the brothers liable for keeping the trusts and subsidiaries going on the Isle of Man, in addition to an entity on the Cayman Islands.

In a recent statement, SEC Enforcement Division Director Andrew Ceresney said that the regulator was committed to sussing out wrongdoing and holding persons accountable for securities law violations regardless of how well concealed or complex the financial scam.

Shepherd Smith Edwards and Kantas, LTD LLP is a Texas securities fraud law firm.

‘Staggering’ Sanctions Slapped On Wyly Brothers In Offshore Case
, Forbes, September 25, 2014

U.S. SEC wins hundreds of millions in Wyly fraud case, Reuters, September 25, 2014

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