Yes, MASSIVE. Knocks Martha Stewart, Galleon, etc into a cocked hat…
The Securities and Exchange Commission today charged brothers Samuel E. Wyly and Charles J. Wyly, Jr. of Dallas with violating federal securities laws governing ownership and trading of securities by corporate insiders. The Wyly brothers reaped more than $550 million in undisclosed gains while sitting on corporate boards by trading stock in those public companies through hidden entities located in foreign jurisdictions to conceal their ownership and trading of those securities.
In short, the SEC claims that over 13 years Sam and Charles were using vehicles in the Isle of Man and the Cayman Islands to sell more than $750m of stock in four companies where they were directors.
Oh, and their attorney, Michale French, and their stockbroker, Lous Schaufele, are also facing charges.
The SEC alleges that the Wylys and French systematically and falsely created the impression that the Wylys’ entire holdings and trading were limited to the fraction that they held and traded domestically. By depriving existing shareholders and potential investors of information deemed material by the federal securities laws, the Wylys were able to sell — in large-block trades alone — more than 14 million shares of issuer securities over a period of 13 years for undisclosed gains in excess of $550 million. The SEC further alleges that the sales generating most of these illicit gains were made pursuant to materially false or misleading SEC filings.
Companies involved: Sterling Software, Michaels Stores, Sterling Commerce and Scottish Annuity & Life Holdings, all of which were traded on the New York Stock Exchange during the relevant period.
Here’s the SEC statement and here’s the formal complaint.
Here’s what the Wyly brothers look like. Charles is on the left:
Here’s their website.
And here’s a video telling their story. Apparently they are as “legendary as the great state of Texas…”
UPDATE: As Lorcan rightly points out below with a link to to Greg Palast’s site, this case is actually a reheat of an affair that came to light five years ago, when the Wyly brothers seem to have forestalled an investigation by the Manhattan District Attorney’s office by returning profits from their questionable dealings.
And when we say “reheat” we mean the SEC has now applied a Bunsen burner. This looks like a case with serious political repurcussions…