Wylys' lawyer warns SEC's $729 million claim would bankrupt them
By Joseph Ax
NEW YORK (Reuters) - A lawyer for Texas tycoon Sam Wyly and his late brother Charles' estate told a federal judge on Friday that a U.S. securities regulator's demand for $729 million in damages for a fraudulent offshore scheme would "bankrupt" them.
Harry Susman told U.S. District Judge Shira Scheindlin in Manhattan the U.S. Securities and Exchange Commission's request was excessively punitive, at the close of a nonjury trial to determine how much the Wylys should pay for their role in the scheme.
"The total amount will bankrupt the Wylys," Susman said, adding there was no evidence their conduct harmed a single investor.
But Bridget Fitzpatrick, a lawyer for the SEC, said the proposed award was appropriate given "egregious" violations that allowed the Wylys to accumulate hundreds of millions of dollars.
The trial comes three months after a jury found the Wylys liable for fraud and other civil charges, in what was the SEC's largest case to reach trial in years.
The agency accused the Wylys of creating a system of trusts in the Isle of Man that netted them $553 million in profits through more than a decade of hidden trades in four companies they controlled: Sterling Software Inc, Michaels Stores Inc [MSII.UL], Sterling Commerce Inc and Scottish Annuity & Life Holdings Ltd, now Scottish Re Group Ltd.
Fitzpatrick said the Wylys should not profit from the scheme, which she said grew so sophisticated that it became a virtual business in itself.
"Since 1992, the Wylys have had what amounts to an interest-free loan from the government, and they have used it to accumulate staggering wealth," she said. Continued...