Prominent Dallas businessman Samuel Wyly has filed for bankruptcy protection as he and the estate of his brother face up to $400 million in penalties after being found liable for hiding stock holdings overseas.
Wyly filed a bankruptcy petition in federal district court in Dallas on Sunday.
The one-time owner of the Michaels arts-and-crafts store chain said that his biggest liabilities are to the IRS -- the amount is unknown -- and $198 million to the Securities and Exchange Commission.
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A judge in New York ruled last month that Wyly and the estate of his brother, Charles, must surrender up to $400 million after a civil jury found that they had engaged in a 13-year fraud that involved creating a web of offshore trusts and subsidiaries to hide stock sales. Regulators said they made $550 million in profit.
Wyly, 80, listed assets of $100 million to $500 million, but his lawyers said he needed to file for bankruptcy protection "due to the massive costs of investigations and then litigation" by the SEC and the collection of the court judgment.
The SEC sued the Wylys in 2010. Charles Wyly died the following year in a car crash at age 77.
This year, a jury in federal court in New York sided with the SEC and found that they Wylys had misused trusts in the Isle of Man and the Cayman Islands. The judge ordered Wyly and his brother's estate to forfeit more than $187 million, and she said that interest could push the total to between $300 million and $400 million.
The Wylys built, grew and sold several companies including Sterling Software, which they sold for $4 billion just before the dot-com bubble burst in 2000, and Michaels Stores, which was sold in 2006 for $6 billion.
The SEC said that the brothers used proceeds from secret sales of stock in their companies to buy ranches and condominiums around Aspen, Colorado; a horse farm near Dallas; art and jewelry. The jury decision was a big victory for the SEC after it lost a high-profile civil case against businessman and Dallas Mavericks owner Mark Cuban.
The Wyly brothers were also major donors to Republican candidates and causes and donated money to help build a performing arts center in Dallas.