“The SEC’s threat of taking defendants to trial is only a stick if they are able to use it by winning,” says
Tomko, who is now a lawyer at the Dykema law firm in Dallas. “The SEC is definitely feeling the pressure.”
The SEC claims that the Wylys illegally hid their ownership interests and stock sales in companies in
which they served as directors, including Irving-based Michaels Stores, by establishing fake trusts and
corporate subsidiaries based in the Cayman Islands and the Isle of Man.
The SEC told jurors this week that the Wylys used these offshore trusts to conceal $550 million in profits.
Charles Wyly, who was one year older than his brother, died in a car crash in Colorado in 2011.
Sam Wyly started his first business providing computer services to other professionals in 1963. He had
$1,000 in his pocket and only three customers, according to his memoir. By 1971, the company, University
Computing, generated more than $120 million in revenues.
Records show that the Wylys contributed about $10 million to political campaigns, starting with Richard
Nixon’s 1968 election bid through their support of George W. Bush. The brothers were prolific in their
support of charities, donating a reported $90 million to various causes, including assisting minority
businessmen in starting their own companies.
Wyly’s first run-in with the SEC came in 1979 when the agency accused him of making undisclosed
payments to colleagues to purchase bonds in a company he owned that was facing bankruptcy. He settled
the case without admitting he did anything wrong.
The SEC says that will not happen this time.
“This is a case about lies, deception and fraud,” SEC trial attorney Bridget Fitzpatrick told the eight-
women and four men on the Manhattan jury.
Houston trial lawyer Steve Susman, who represents Wyly, countered during opening statements that his
client “acted in complete good faith.” Susman is representing Wyly along with his partner at Susman
Godfrey, Terry Oxford, who offices in Dallas. Bickel & Brewer has also represented the Wylys in this case.
Susman told jurors that his client relied on lawyers to advise them what was legal and illegal.
But the defense’s argument blaming the lawyers became more difficult last month when Michael French,
the Wylys’ lawyer who handled their offshore trusts, cut a deal with the SEC in which he admitted
wrongdoing and agreed to pay nearly $800,000 in fines and penalties.
More importantly, according to lawyers familiar with the case, French, who is a former lawyer at Jackson
Walker in Dallas, agreed to cooperate with the SEC in its case against the Wylys.
“It will be much harder for the defendants to argue that they relied completely on their lawyers and that it
is all their lawyers’ fault if the lawyer is on the witness stand pointing the finger back at them,” says
Securities lawyers say the SEC’s case against the Wylys is stronger than the government’s case against
Mark Cuban because the SEC has French and Wyly’s former Lehman Brothers stockbroker, Louis
Schaufele, as witnesses who are able to take jurors inside the scheme.