Next Line of Defense for Wylys: "But Bill Brewer Said It Was OK"

First, the Wylys sent their shares here, to the Isle of Man. Next, they converted them to annuity payments. Then ... oh, forget it. It was fraud.
First, the Wylys sent their shares here, to the Isle of Man. Next, they converted them to annuity payments. Then ... oh, forget it. It was fraud.

When I saw the big news yesterday from New York about the Dallas billionaire Wyly brothers -- a federal jury found them guilty on all counts in a $550 million tax evasion case -- I had to go back to Joe Guinto's excellent story last year in D Magazine: I thought I distinctly remembered both Sam Wyly and his main man in Dallas, lawyer Bill Brewer, saying this was the one outcome that would never happen.

Re-read it. Yup. That's what they told Guinto. Then again, what else were they going to say?

One brother, Charles, died in a car wreck in 2011, but Monday's decision, if it stands, means the feds will be able to claw back money from his estate as well as take it from the living brother, Sam, 79. A Manhattan jury agreed with prosecutors that the Wylys engaged in an elaborate fraud to dodge their legitimate tax obligations.

The fraud worked mainly by shipping shares of companies to an off-shore trustee and then claiming profits were actually annuity payments ... oh, forget it. Who am I kidding? I can't explain that. My financial acumen stops at Quicken. But the jury said whatever they did -- some kind of hooey -- was fraud and they were liable on every count.

It was a civil trial, not criminal. Nobody has to go to jail, just cough up half a billion dollars. If it meant I could keep the half billion dollars, I gladly would go straight to jail in tails and a top hat. But half a billion is a check the Wylys can write.

Apparently an elaborate defense put on for them by other lawyers, not Brewer, was a total dud with the jury. Jurors deliberated two and a half days, but afterward one of them told Dealbook they spent most of that time searching for any kind of a legitimate defense for the Wylys. The juror, Kevin Rothman, a retired postman, said, "We couldn't see it. We couldn't find it."

Nothing involving half a billion dollars is funny -- I know that -- but I couldn't suppress a kind of half-giggle when I went back to Guinto's piece and reread Brewer's novel defense of the Wylys. Brewer told Guinto that the Wylys did everything the feds accused them of doing, all of it, but it was all going to turn out to be totally legal and copacetic, because the Wylys didn't mean to do anything wrong.

"The battleground here is over intent," Brewer told Guinto. "What happened is not in dispute."

When I first read that a year ago I imagined an outcome in which the Securities and Exchange Commission, after mounting a case that went back the better part of decade, would slap itself in the forehead and say, "Oh, you guys didn't mean it? Well, sure then, forget the whole thing."

If we shouldn't giggle about a case this big, then neither are we required to feel sorry for anybody. If the Wylys ever really do have to lay out the half bil' sought by the government, it will represent a quarter of their worth, according to Guinto.

And it's not like it wasn't a fair fight. Guinto quoted Wayne State University (Yeah, Detroit!) Law School securities law expert Peter Henning, one of few academics to follow the SEC case against the Wylys closely, as saying hardly anybody has enough money to meet the legal firepower of the federal government. "But the Wylys do," Henning said. "They can match the SEC dollar for dollar, lawyer for lawyer."

Toward the end of Guinto's piece, he quoted the late Charles Wyly as expressing confidence that Brewer will turn out to be right; the Wylys will be saved by their good intentions.

"For the government to develop a theory that we intended to do something wrong just goes against the core basis on which we have operated," Charles Wyly told Guinto. "Sam and I were really leaders in good corporate governance. We really strived to have good board procedures. And legal compliance is right up there with good governance. They may be looking back in hindsight and constructing a theory that there was something malicious about it all, but they'll realize there was not. We never intended to cross any line."

What can you say? Tell it to the postman.

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