SEC seeks $1.4bn from Wyly brothers

New York - The US Securities and Exchange Commission says Texas tycoon Sam Wyly and the estate of his late brother Charles should pay damages totalling $1.41bn for their role in a scheme that hid trades in companies they controlled using offshore trusts.

In a court filing the SEC said the amount was justified by the finding of a New York federal court jury that the Wylys had engaged in a fraudulent scheme that over 13 years earned them $553m in profits that were not disclosed to investors in the companies.

"It is time to hold the Wylys accountable," the SEC wrote.

"It is time to strip away the immense profits that flowed from their misconduct. It is time to impose the maximum penalty allowable under the securities laws."

Assess damages

Lawyers for the Wylys said in a court filing that "there would be nothing equitable about imposing such a massive judgment."

The SEC's call for the huge sum comes ahead of an August 4 non-jury trial before US District Judge Shira Scheindlin to assess damages following the verdict in May in what was the SEC's largest case to reach trial in recent years.

The SEC said the Wylys used a complicated system of trusts in the Isle of Man to conceal trading from 1992 to 2004 in four companies on whose boards they sat - Sterling Software, Michaels Stores, Sterling Commerce and Scottish Annuity & Life Holdings now called Scottish Re Group.

The SEC said Sam Wyly, 79, should have to disgorge $371.1m in trading profits plus $528m in interest, pay a $72.3m penalty and be subject to an injunction.

Sam Wyly last appeared on Forbes' list of the 400 richest Americans in 2010 with a net worth of $1bn.