Judge Sets Sam Wyly SEC Fine at $198.1 Million

By Katy Stech 

A federal judge has finalized an order for ex-billionaire and Texas entrepreneur Sam Wyly to pay a $198.1 million in fines, after regulators accused him of profiting for more than a decade from hidden stock trades.

In a court order on Thursday, U.S. District Judge Shira Scheindlin calculated the amount Mr. Wyly and his deceased brother's estate owe the U.S. Securities and Exchange Commission to be $299.4 million. The brother, Charles Wyly, was assessed a fine of $101.2 million.

Mr. Wyly's lawyer Stephen D. Susman on Friday didn't respond to an emailed request for comment. Mr. Wyly couldn't be found for comment.

Judge Scheindlin's ruling came after a jury in May, in a civil suit brought by the SEC, ruled against Mr. Wyly.

The judge in September had said the SEC's requested punishment of up to $729 million had been "staggering," indicating at the time that a lower total of fines was more in order.

SEC officials had accused the Wyly brothers of using a web of trusts and other entities based in the Isle of Man and Cayman Islands to sell large portions of shareholdings in four companies but not disclosing those sales in filings with regulators over a 13-year period starting in 1992.

Lawyers for the Wylys had argued throughout the trial that the trusts were set up for tax purposes and to facilitate estate planning, but that the Wylys didn't have control of them.

Mr. Wyly, 80, filed for Chapter 11 protection on Oct. 19, saying he wouldn't be able to afford such the steep penalty being contemplated by the judge. The continuing bankruptcy proceedings could help Mr. Wyly negotiate a repayment plan with the regulators.

Mr. Wyly also has downsized his lifestyle. Last year, he sold his New York City apartment and several paintings at a 19th century European art sale through Christie's Inc. He has let go of both staffers in his "family office," as well as writers who helped him author books on entrepreneurship, according to bankruptcy court papers.

The Wylys built their fortune by founding or acquiring several companies, including business-software makers Sterling Software Inc. and Sterling Commerce Inc., arts-and-crafts chain Michaels Stores Inc. and insurer Scottish Re Group Ltd. Sterling Software was later sold to CA Technologies Inc. and Sterling Commerce to AT&T Inc. (T), which later sold it to International Business Machines Corp. (IBM).

The widow of Charles Wyly, Sam's brother who died in a car accident in 2011, also has filed for bankruptcy.

Christopher M. Matthews contributed to this article.

Write to Katy Stech at [e-mail].

Access Investor Kit for CA, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US12673P1057

Access Investor Kit for International Business Machines Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US4592001014

Subscribe to WSJ: http://online.wsj.com?mod=djnwires