The U.S. Securities and Exchange Commission has added the children and wives of Texans Charles and Samuel Wily to the fraud case that has already rendered a $187.7M award, plus interest, in its favor. The move would come following Sam Wiley’s decision to file for bankruptcy earlier this month.
Over a dozen relatives are now on the lawsuit, including Caroline Wyly, who is the widow of Charles Wyly. He died in a car crash in 2011. Carolyn also has filed for bankruptcy. Also now included are the children of both Charles and Sam.
Regulators say the family members needed to be added to stop the dissipation of the two men’s assets. However, they noted that the relatives possess no legal rights or are traceable to the defendants ill-gotten gains.
The SEC accused the billionaire brothers of setting up a complex system of trusts in the Isle of Man that allowed them to generate $553 million in untaxed profits because of concealed trades in companies under their control. The fraud took place for over ten years.
Sam said the bankruptcy claim was necessary to preserve assets following the ordering of the award. He noted that he had between $100M and $500 in liabilities and assets. He also pointed out that it cost him $100 million in legal fees to deal with both the SEC investigation and an Internal Revenue Service probe. Meantime, the SEC says that the billionaire is just trying to get around the enforcement action.
The Wylys’ attorneys say that Sam and Charles’s estate don’t have enough funds to pay the $187.7 million award, especially as with interest the total amount could run from $300 million to $400 million.
In her bankruptcy filing, his widow, Caroline said she has been insolvent since her husband’s passing. Her lawyer noted that Caroline’s income is not enough to maintain the assets of her deceased husband that are now her responsibility.
Ordering an asset freeze on the Wylys’ funds is the expected next step. U.S. District Judge Shira Scheindlin in Manhattan, who presided over the award the brothers have been ordered to pay, is also the judge scheduled to deal with this matter.
SEC Adds Wyly Kin to Suit in Bid to Secure $187 Million, Bloomberg, October 28, 2014
Texas investor Sam Wyly files for bankruptcy after losing SEC fraud case, Reuters, October 20, 2014
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