[Marxism] Major donor to ultraright causes were crooks
lnp3 at panix.com
Fri Jul 30 07:30:46 MDT 2010
SEC charges billionaire Texas brothers who donate to GOP with fraud
By Zachary A. Goldfarb and Philip Rucker
Washington Post Staff Writer
Friday, July 30, 2010; A01
Sam and Charles Wyly, billionaire Texas brothers who gained
prominence spending millions of dollars on conservative political
causes, committed fraud by using secret overseas accounts to
generate more than $550 million in profit through illegal stock
trades, the Securities and Exchange Commission charged Thursday.
The Wylys, who have been generous contributors to the Republican
Party and GOP candidates, have spent the past several years facing
questions, including from a Senate investigative committee, about
whether they hid millions of dollars in tax shelters abroad.
Through their lawyer, the Wylys denied all charges.
According to the SEC, the brothers, who live in Dallas, created an
elaborate and clandestine network of accounts and companies on the
Isle of Man and in the Cayman Islands. The brothers then used
these accounts and companies to trade more than $750 million of
stock in four public companies on whose boards they served, not
filing the disclosures required for corporate insiders, the SEC said.
In one case, the SEC alleges that the Wylys traded based on
insider information they learned as board members, netting a
profit of $32 million.
"The cloak of secrecy has been lifted from the complex web of
foreign structures used by the Wylys to evade the securities
laws," Lorin L. Reisner, deputy director of SEC enforcement, said
Thursday in a statement announcing the civil charges.
The agency is seeking unspecified financial penalties and a
variety of other sanctions, including barring the Wylys from
serving as directors or top executives of public companies.
William Brewer III, a lawyer representing the Wylys, said they
intend to clear their name.
"After six years of investigations, the SEC has chosen to make
claims against the Wyly brothers -- claims that, in our view, are
without merit," Brewer said in a statement. "It will come as
little surprise to those who know them that the Wylys intend to
vigorously defend themselves -- and expect to be fully vindicated."
Charles Wyly, 76, and Sam Wyly, 75, have led a largely reclusive
life, with their public persona defined by their political
activities. Charles Wyly and his wife, Dee, have given more than
$1.5 million to more than 200 Republican candidates, party
committees and conservative political action committees over the
past 20 years, according to an analysis by the Center for
Responsive Politics. Sam Wyly and his wife, Cheryl, gave more than
$970,000 over the same period, the analysis shows.
The Wylys have given to dozens of Republican candidates, none more
so than the Bush family. The brothers were supporters of the
campaigns of former President George H. W. Bush and his son,
former President George W. Bush.
In 2000, the Wylys financed a third-party group, Republicans for
Clean Air, that launched a television advertising broadside
against George W. Bush's chief opponent, Sen. John McCain
(R-Ariz.), on the eve of crucial GOP presidential primaries. Later
that year, the brothers each gave $100,000 to fund Bush's
In 2004, the Wylys helped fund Swift Boat Veterans for Truth,
another third-party organization that ran controversial television
ads attacking the military record of Sen. John F. Kerry (Mass.),
Bush's Democratic opponent.
"They are among the biggest of the big when it comes to campaign
bank-rollers, and their donors list is a who's who of the
Republican Party over the past decade," said Dave Levinthal, a
spokesman at the nonpartisan Center for Responsive Politics. "It's
almost hard to find prominent Republicans who haven't been a
beneficiary of their financial largess. They've definitely been
very kind, financially speaking, to a number of Republicans."
Their biggest beneficiaries include three Texas Republicans, Sen.
Kay Bailey Hutchison, National Republican Congressional Committee
Chairman Pete Sessions and former House Republican leader Richard
K. Armey, according to the Center for Responsive Politics
analysis. The Wylys also have given to Senate Minority Leader
Mitch McConnell (Ky.), former New York mayor Rudolph W. Giuliani
and many other members of the GOP.
Both brothers, according to Forbes magazine, are billionaires who
amassed their fortune by founding a computer company and investing
in a wide range of interests including oil, insurance and
restaurants. In 1979, Sam Wyly faced sanctions by the SEC for
improper regulatory disclosures.
They have been the subject of probes into potential financial
wrongdoing since then. In 2006, the Senate permanent subcommittee
on investigations completed a report on tax havens that focused on
Over 13 years, the Wylys used an "armada" of lawyers, brokers and
other professionals to manage hundreds of millions of dollars in
transactions that amounted to "the most elaborate offshore
operations reviewed by the Subcommittee," according to the panel's
In announcing its case, the SEC alleged that the Wylys' improper
trades benefited them in many ways. They used the proceeds to buy
art, collectibles, and jewelry worth tens of millions of dollars,
according to the complaint. They spent $100 million to buy real
estate, including two ranches in Aspen, Colo., two condominiums in
Aspen, and a 100-acre horse farm outside Dallas. They also used
the proceeds to cover charitable contributions made by the Wylys,
including $8 million to Sam Wyly's business school alma mater and
a $2.5 million contribution to a church Charles Wyly attended.
The agency alleges that the Wylys committed fraud and various
other violations of securities laws while sitting on the boards of
four companies over the course of a decade: Michaels Stores,
Sterling Software, Sterling Commerce and Scottish Annuity & Life
The SEC says that by using offshore accounts to trade shares of
these public companies, the Wylys were able to escape filing the
regulatory disclosures required of board members when they buy or
By keeping their trading activity secret, the Wylys deprived
outside investors of information they could use "to gauge the
sentiment of public companies' insiders and large shareholders
about the financial condition and prospects of those companies,"
the SEC said.
In one instance, the Wylys used insider information to make an
offshore purchase of shares in Sterling Software, where they
served as chairman and vice chairman, according to the complaint.
They did not disclose the purchase even though they knew the
company was soon going to be sold, according to the SEC. Less than
four months later, Sterling Software was sold, and the Wylys
netted nearly $32 million.
"The Wylys have always received the advice and counsel of leading
accounting and legal professionals," said Brewer, the brothers'
attorney in the SEC matter. "They have never been given any reason
to believe the financial transactions in question were anything
other than legal and fully appropriate."
The SEC also charged the Wylys' longtime personal attorney,
Michael French, and their stockbroker, Louis Schaufele III, for
their roles in the alleged scheme. French also served on the board
of three of the companies.
A lawyer for French did not return calls or e-mails seeking
comment. A lawyer for Schaufele declined to comment.
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