After successes, Wyly brothers united again by suit
dallas pair accused of half-billion-dollar fraud own prominent name in philanthropy, politics
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.”
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.