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

Categories: Schutze

isle_of_man.jpg
Wikipedia
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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50 comments
holmantx
holmantx topcommenter

Looks like the Wylie Bros just had some bad facts to deal with.

lilythomas514
lilythomas514


ᴡʜᴀᴛ Aᴍʏ sᴀɪᴅ I ᴀᴍ ɪɴsᴘɪʀᴇᴅ ᴛʜᴀᴛ ᴘᴇᴏᴘʟᴇ ᴄᴀɴ ɢᴇᴛ ᴘᴀɪᴅ $7961 ɪɴ ᴏɴᴇ ᴍᴏɴᴛʜ ᴏɴ ᴛʜᴇ ᴄᴏᴍᴘᴜᴛᴇʀ . ɢᴏ ᴛᴏ ᴛʜᴇ ᴡᴇʙsɪᴛᴇ 


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Myrna.Minkoff-Katz
Myrna.Minkoff-Katz topcommenter

It baffles Myrna that poor-ass zhlubs on these comment boards lionize billionaire crooks and vociferously defend them as heroes. 

Guesty
Guesty

Jim,  

I could be mistaken, but I don't think it was a tax case.  It was brought by the SEC, so I assume the fraud concerned the failure to disclose the transactions to other shareholders. In other words, I believe all this case was about was the failure to say "hey, we just [bought/sold] x shares of the company" within a few days of the transaction.  Shareholders love that type of information, which is required to be publicly disclosed of large stock owners of public companies.  But the trades themselves were not alleged to have been fraudulent (i.e. no one was duped into buying or selling shares by lies, etc.). 

It matters because while the trades involved $550 million, they didn't make the $550 million through fraud.  So I don't think they will have to pay $550 million.  The SEC may have a hard time showing any harm came to shareholders as a result of shareholders not knowing the trades were made.  

I don't think this is the type of fraud that raises eyebrows among the privileged classes.  This is closer to Martha Stewart territory than anything else.  

Now the tax implications are more interesting, but I don't know anything about tax law and I assume the IRS will be bringing that case if there is a case to be made.     

ScottsMerkin
ScottsMerkin topcommenter

Mark Cuban met the legal firepower of the government.....and won

ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

$500 Million is chump change to Uncle Sugar.  He will burn through this in 1 hour 7 minutes.


That is what is scary to me.

WhiteWhale
WhiteWhale

One big question is how many others are using similar scams?

Myrna.Minkoff-Katz
Myrna.Minkoff-Katz topcommenter

Forbes says his net worth is $1.1 billion.  The 550 mil is obviously a significant chunk.  I'm not completely unsympathetic with the old right-wing crook, however.  He is quite generous with his ill-gotten gains.

ozonelarryb
ozonelarryb

Now we know the other difference between rich people and the rest. For the majority, it's stupidity that is the most communicable disease, for the rich, it's self delusion. But they work out the same, eh wot.

TheRuddSki
TheRuddSki topcommenter

Half-billion measly dollars. About half the price Mark Zuckerberg would pay for a app no- one has ever heard of.

wcvemail
wcvemail

The fervor of the true self-believer goes beyond cognitive dissonance, especially when a highly paid attorney provides the backup. If the Wylies had been hooked up to a polygraph and asked, "Did you mean to evade taxes?", their "no" would not have even quivered the needle. 

TheRuddSki
TheRuddSki topcommenter

@Myrna

It baffles Myrna that poor-ass zhlubs on these comment boards lionize billionaire crooks and vociferously defend them as heroes.

Exactly how many comments do you see here that lionize, and defend them as heroes?

I count zero.

JimSX
JimSX topcommenter

@Guesty  

You are certainly right that this was an SEC case, not an IRS case. It all started 8 years ago or so with a senate investigative committee finding that the Wylys had dodged about $300 million in taxes with their off-shore scheme, but the committee finding produced no charges. The SEC case was to prove the Wylys fraudulently concealed assets,their motive being to dodge hundreds of millions in unpaid tax obligations. This was not a technical paper-shuffling mistake, in other words. It was an attempt to skirt the law to avoid paying lawful taxes. 

ScottsMerkin
ScottsMerkin topcommenter

@Myrna.Minkoff-Katz  the gains were not ill gotten, it the taxes they didn't pay.  But I should not have expected you to know this.  you were just to eager to dump on a right winger

holmantx
holmantx topcommenter

@TheRuddSki  

When none are available, the Perfumed Intellectual will shadow-box.

or hear voices.

GuessWho-I-Sue
GuessWho-I-Sue

@TheRuddSki Zero is the number of votes for Muslims while the votes for Jesus stand at 90 and counting. 


Only one zero.  Only one hero. 

leftocenter
leftocenter

@TheRuddSki @myrna

Rudd -- Don't make me agree with you, but I didn't see any either...maybe a little envy, not hero-making.

FauxburbanDallas
FauxburbanDallas

@JimSX If the Senate Committee had made any "findings" of legal significance, they would have referred the matter to the IRS. The fact is, the overseas trusts may be  perfectly legal vehicles to diminish tax liability. No one would say that I am "dodging" or "skirting" lawful taxes by taking my mortgage interest deduction, or gifting to my children's educational trusts. You can argue that such tax shelters are bad policy, but you can't argue that the people who take advantage of them are bad people. If IRS decides to proceed against them, maybe I'll be made wrong. However, my lawyer is a CPA with 20 years experience and he says that anyone who claims they understand the tax code is either lying or stupid.

Guesty
Guesty

@JimSX I'm sure all of that is true, but none of that has been proven in court.  And you shouldn't read this as a defense of the Wylies, because I'm no fan of the privileged class and their manipulation of tax laws (or other laws for that matter). 

I just wish the feds wouldn't nibble around the edges with this piss-ant stuff (failure to disclose trades, that's all you got) and go for what really matters.  If they owe taxes, that should be the case and the feds should go for the jugular with criminal charges (including the lawyers involved).  If the feds can't prove it, then they need to use the case to close the loopholes that allowed it to happen so the next guy that tries it and gets caught does go to jail.  But neither of those things happen when all you go for are moral victories on technical grounds that really aren't all that significant. 

mm32
mm32

@ScottsMerkin Yes, if you net a lot of money by not paying your taxes, that is definitely an ill-gotten gain.


RTGolden1
RTGolden1 topcommenter

@DonnSterling @scottindallasDon't want to get embroiled in this one.  Just have a question for you.  Who the hell do you think arranged to have the Bible put together the way it is?  That is the heresy and perversion by the Romans scott is talking about.  The Bible, as you know it, stands in damnation of itself, for in one part it promises curses on those who add to it and those who take away from it, yet the book itself is only a selection from among many many many books that could have been included.

Another thing Islam has right is keeping the original language of the faith intact.  Ancient Hebrew, Ancient Greek and Ancient Latin are dead languages, there is NO surefire way to translate them, not even with modern offshoots of those languages.  Just something to think about.

GuessWho-I-Sue
GuessWho-I-Sue

@scottindallas  I can assure you sir that this woman finds no perversion in the New or Old Testament.  I think you can find plenty of perversion within any Roman society.

scottindallas
scottindallas topcommenter

@DonnSterling @TheRuddSkionly one heresy, the heresy of the Trinity.  Mohommad tought that Jesus was the messiah, you believe the heresy put forward by a Roman Emperor.  A perversion that your Bible tells you will lead most of Christendom astray


TheRuddSki
TheRuddSki topcommenter

@leftofcenter

Well, if you parse Myrna's vague complaint, she's apparently accusing some people of lionizing rich crooks in general. I don't think anyone is interested in probing any further as to specifics.

But, I suspect she's sort of a female Harry Reid, in that wealthy democrats are fine, it's the wealthy Republicans who are crooked.

TheRuddSki
TheRuddSki topcommenter

@Myrna

According to the only means of measure available on this comment boards, which would be the "Like" button, it's a contest between you, tdkisok and bvckvs for "least liked".

That's your problem.

TheRuddSki
TheRuddSki topcommenter

@Myrna

I see no defense of the wryly brothers here. If your statement means "Myrna is aghast at how many people defend people Myrna hates", that might be an indication that you, not other commenters, have a problem.

FauxburbanDallas
FauxburbanDallas

I don't think this court or any other court for that matter has held those tax shelter trusts to be "not legal." Or are they guilty until proven innocent because they are rich guys who donated to the Republican party and candidates? Tax treatment of the trusts was not litigated in this proceeding.

JimSX
JimSX topcommenter

@FauxburbanDallas @JimSX  

I believe the news coverage of the verdict included descriptions of members of the Wyly family crying. Do we think that was just about hurt feelings?

ScottsMerkin
ScottsMerkin topcommenter

@FauxburbanDallas your CPA is correct, no one understands the tax code, not even the IRS or the lawyers who make tax policy.  It's all interpretation

holmantx
holmantx topcommenter

@JimSX  

The Wylie Bros have donated about $10 Mil to Republicans.  It's going to be an IRS case.

Guesty
Guesty

@JimSX  

But your own explanation shows why that theory is meaningless without an actual tax case.  The $550 million is "the amount of concealed gains."  But what would have happened if the transactions were disclosed?  In other words, what does the fraud have to do with the gains?  That is what the SEC will have to show.  Your linked article actually spells out my point very well:

"Wayne State University Law School securities law expert Peter Henning, who is one of the few academics who has closely followed the SEC’s arcane case against the Wylys, and asked him what kind of penalties or disgorgement the Wylys could be looking at. 'The SEC styled this case as a fraud claim,' Henning says. 'But this wasn’t fraud or theft in the direct sense. It’s not like the Wylys stole money from someone directly or ran a Ponzi scheme. The SEC said the Wylys hid their positions in companies they controlled, but that kind of fraud is technical in nature. How much money did they gain from that? It’s possible that this fraud was of little harm. The SEC is going to have to show the judge some hard numbers to prove otherwise.'" 

ScottsMerkin
ScottsMerkin topcommenter

@mm32 @ScottsMerkin  Even if they paid taxes they still have a shit ton of money, and that money that the family has was not ill gotten.  Its obviously apparent since they can cut a $500 million dollar check and still have a coll $500+ million left

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