Af­ter suc­cesses, Wyly broth­ers united again by suit

dal­las pair ac­cused of half-bil­lion-dol­lar fraud own prom­i­nent name in phi­lan­thropy, pol­i­tics

Austin American-Statesman - - METRO & STATE - By Kel­ley Shan­non and Michael Graczyk

Broth­ers Charles and Sam Wyly, born a year apart dur­ing the Great De­pres­sion, al­most al­ways have been joined at the hip.

They were kids when the col­lapsed econ­omy forced the sur­ren­der of the fam­ily cot­ton farm in Lake Prov­i­dence, La. Later, they starred on the high school foot­ball team, stud­ied at Louisiana Tech Uni­ver­sity in the 1950s and even­tu­ally set sales records at IBM.

The rose to the elite class of bil­lion­aires, A-list mem­bers of Dal­las so­ci­ety and reg­u­lar donors to phil­an­thropic projects and pri­mar­ily con­ser­va­tive Repub­li­can can­di­dates and causes.

Now, the broth­ers are to­gether again — named in a fed­eral com­plaint that ac­cuses them of us­ing off­shore havens to hide more than a half-bil­lion dol­lars in prof­its over 13 years of in­sider stock trad­ing.

If the two are con­victed, the fi­nan­cial fall­out could af­fect pol­i­tics, where Texas Repub­li­cans could see a sub­stan­tial source of po­lit­i­cal con­tri­bu­tions wither.

In a 78-page fed­eral com­plaint filed in New York City, the Se­cu­ri­ties and Ex­change Com­mis­sion said Thurs­day that the Wylys held and traded tens of mil­lions of shares in com­pa­nies on whose boards they served and “de­frauded the in­vest­ing pub­lic” by mis­rep­re­sent­ing their own­er­ship and trad­ing of those stocks and us­ing “an elab­o­rate sham sys­tem of trusts and sub­sidiary com­pa­nies” off­shore.

The broth­ers’ at­tor­ney, Wil­liam Brewer III, branded the SEC com­plaint as “with­out merit.”

“They have never been given any rea­son to be­lieve the fi­nan­cial trans- ac­tions in ques­tion were any­thing other than le­gal and fully ap­pro­pri­ate,” Brewer said.

Giv­ing big, giv­ing qui­etly

Charles Wyly, 76, and brother Sam, 75, with their wives, have do­nated al­most $2.5 mil­lion to more than 200 Repub­li­can can­di­dates and com­mit­tees at the fed­eral level over the past two decades, ac­cord­ing to the non­par­ti­san Cen­ter for Re­spon­sive Pol­i­tics. The broth­ers them­selves have said they’ve given about $10 mil­lion to Repub­li­can can­di­dates and causes since the 1970s.

In Texas pol­i­tics, they give big, but qui­etly, Austin-based po­lit­i­cal con­sul­tant Bill Miller said Fri­day.

“Their pro­file is pretty darn low,” Miller said. “I’m not say­ing its in­vis­i­ble be­cause they’re proac­tive when they play. … They’re out there, but they’re sub­ter­ranean.”

The elder Wyly is a for­mer mem­ber of a White House Ad­vi­sory Coun­cil for Man­age­ment Im­prove­ment. In the 1970s, Sam Wyly was a mem­ber of the Elec­toral Col­lege and chair­man of the Pres­i­den­tial Ad­vi­sory Com­mis­sion on Mi­nor­ity En­ter­prise dur­ing the Nixon and Ford ad­min­is­tra­tions.

Over the past decade, in­cum­bent Repub­li­can Gov. Rick Perry has been one of the biggest po­lit­i­cal bene­fac­tors, re­ceiv­ing more than $300,000 com­bined from the Wylys since 2000, ac­cord­ing to Texas Ethics Com­mis- sion re­ports.

Lt. Gov. David De­whurst, At­tor­ney Gen­eral Greg Abbott and Comptroller Su­san Combs also have been re­cip­i­ents. The Wylys have oc­ca­sion­ally given small amounts to Demo­cratic leg­is­la­tors from Dal­las and also have con­trib­uted to po­lit­i­cal ac­tion com­mit­tees.

“One of the most highly charged topics around is pol­i­tics, and one that’s more highly charged is po­lit­i­cal money,” Sam Wyly told The As­so­ci­ated Press in 2008. “Peo­ple just love to write and read about it.”

Per­sis­tence pays off

For Charles, who is mar­ried and a fa­ther of four and with seven grand- chil­dren, and Sam, also mar­ried with six kids and 10 grand­chil­dren, the road to wealth is clas­sic rags-toriches Amer­i­cana.

In “En­tre­pre­neur to Bil­lion­aire: 1,000 Dol­lars & an Idea,” a 2008 mem­oir writ­ten by the younger Wyly — a one-time as­pir­ing jour­nal­ist — he talks about grow­ing up in a house with­out elec­tric­ity, how he wound up in Dal­las as an IBM trainee along­side a skinny kid from East Texas named Ross Perot and how, like Perot, he saw an op­por­tu­nity to sell com­put­ing ser­vices to com­pa­nies that couldn’t af­ford their own com­put­ers.

“I think there is just as good of op­por­tu­ni­ties to­day as when I started,” he said in the 2008 AP in­ter­view. “Some folks give up too soon when they should be per­sis­tent.”

With $1,000 to his name, he started Uni­ver­sity Com­put­ing, cred­ited with pi­o­neer­ing “the mar­riage of the com­puter and the tele­phone,” ac­cord­ing to the broth­ers’ web­site. Sam was chair­man. Charles was pres­i­dent.

From there, some­times act­ing with his brother, he bought and sold sev­eral com­pa­nies in­clud­ing a min­ing op­er­a­tion, Bo­nanza restau­rants and Irv­ing-based Michaels Stores Inc., which is among the com­pa­nies named in the SEC com­plaint.

Over the years, Sam Wyly took on AT&T’s mo­nop­oly in data trans­mis­sion: He built Ster­ling Soft­ware and sold it for $4 bil­lion to Com­puter As­so­ci­ates, only to launch a proxy fight against the new own­ers, which he set­tled for a pay­ment of $10 mil­lion.

In Fe­bru­ary 2005, word of the SEC in­ves­ti­ga­tion that cul­mi­nated with Thurs­day’s com­plaint was dis­closed in a news re­lease from Michaels, where the broth­ers had swapped roles as chair­man since ac­quir­ing the firm in 1983.

In a state­ment late Thurs­day, their law firm noted that since Oc­to­ber 2006, when the $6 bil­lion sale of Michaels was ap­proved to pri­vate eq­uity firms, “nei­ther Charles nor Sam Wyly has been af­fil­i­ated with any pub­lic com­pany or reg­is­tered en­tity.”

Ed Kos­mick

Helen An­ders

The Charles and Dee Wyly The­atre in Dal­las is a char­ac­ter­is­tic ex­am­ple of the phi­lan­thropy shown by the Wylys, who have dis­played sim­i­lar largess when con­tribut­ing to GOP can­di­dates. A fed­eral law­suit ac­cuses Sam (shown at left) and Charles Wyly of in­sider trad­ing and se­cu­ri­ties fraud in­volv­ing more than $550 mil­lion in un­re­ported prof­its.

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