Two men share securities regulation news

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Securities Regulation Daily, May 12, 2014

Jury finds Wyly brothers liable for secret trading in their own companies

By Anne Sherry, J.D.

A jury verdict delivered today in the SEC’s case against Sam and Charles Wyly found the brothers liable for fraud and for violating reporting requirements for corporate insiders. The SEC prevailed on all 13 counts of its 2010 complaint describing a 13-year scheme in which the Wylys traded securities of public companies they had acquired or founded and on whose boards they sat, without disclosing their ownership and trading of the securities (SEC v. Wyly, May 12, 2014).

The Wylys used a system of trusts and subsidiary companies located in the Isle of Man and the Cayman Islands to hide their ownership and control of the securities of Michaels Stores, Inc., Sterling Software, Inc., Sterling Commerce, Inc., and Scottish Annuity & Life Holdings Ltd. The Wylys used trust agreements that purported to vest complete discretion and control in the offshore trustees, when in fact the Wylys never relinquished their control over the securities and continued to vote and trade the securities at their sole discretion. Their attorney, Michael C. French, and stockbroker, Louis J. Schaufele III, also named as defendants, profited from their assistance in the fraud. The defendants’ Schedule 13D filings, when they were made at all, materially underreported the number of shares they beneficially owned or included other omissions and misrepresentations.

The jury found in favor of the SEC on all 13 counts of the complaint. Andrew Ceresney, Director of the Division of Enforcement, said in a statement: “We are gratified by the jury’s verdict …. 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.”

The case is No. 10 CV 5760.

Attorneys: David J. Gottesman for the SEC. Martin Robert Pollner (Loeb & Loeb LLP) for Samuel E. Wyly.

Companies: Michaels Stores, Inc.; Sterling Software, Inc.; Sterling Commerce, Inc.; Scottish Annuity & Life Holdings Ltd.

MainStory: TopStory FraudManipulation Enforcement NewYorkNews

Securities Regulation Daily

Introducing Wolters Kluwer Securities Regulation Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.

A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.