Wyly family in talks to settle big U.S. fraud, tax claims

The one-time billionaire Wyly family of Dallas is in negotiations to settle fraud and tax claims by the U.S. government, according to a court filing.

The Securities and Exchange Commission will receive more than $100 million of the judgment it won over claims that Sam Wyly and his late brother Charles used a web of offshore funds to hide assets, according to the filing by lawyers for the independent executor of Charles Wyly’s estate. He died in a car crash in 2011, leaving his wife Caroline “Dee” Wyly on the hook for the judgment. A judge found she had no knowledge of the scheme.

In 2014, a federal jury in New York found the brothers raked in $550 million in illegal profits by using offshore accounts to hide stock holdings and evade trading limits as the men got rich building companies including the arts-and-craft chain Michaels Stores. The judge ordered the Wylys to forfeit $187.7 million, plus interest.

The Internal Revenue Service claimed the brothers owed back taxes and penalties of more than $2 billion, and Sam Wyly and Dee Wyly quickly filed for bankruptcy.

Now, the Wylys are engaged in a “global settlement dialogue” with the IRS and the Department of Justice, and the SEC has received the overture as well, according to Monday’s filing in New York federal court.

Under Dee Wyly’s bankruptcy proceeding, she’s expected to repatriate $160 million of the money currently sitting in trusts in the Isle of Man, including $106 million earmarked for the SEC payment. The bankruptcy plan is scheduled for confirmation on Oct. 21.

The SEC last week asked a judge to find the executor of Wyly’s estate in contempt and order payment of the judgment, but the executor’s lawyers said Monday the matter is near resolution.

An SEC representative didn’t immediately respond to a request for comment about Monday’s filing.

This story was originally published September 13, 2016 at 9:48 AM with the headline "Wyly family in talks to settle big U.S. fraud, tax claims."