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Hedge Fund Manager Wyly Charged With Fraud
by Paula Schaap ,Senior Reporter , July 30, 2010

A Dallas hedge fund manager and his brother were charged Thursday with selling shares of stock in companies for which they served as board directors.

The SEC filed a complaint in federal court in Manhattan against Samuel Wyly, 75, and his brother Charles, 76, alleging that they made more than $550 million off their insider trades.

Also charged in the SEC complaint were the brothers’ attorney, Michael French and stockbroker, Louis Schaufele.

The Wylys set up a complicated system of sham trusts in the Isle of Man and the Cayman Islands to hide their stock sales in four public companies, the SEC alleged.

The companies were arts-and-crafts retailer Michaels Stores.; Wyly software company Sterling Software (which was sold to Computer Associates in 2000); Sterling Commerce, an AT&T company recently sold to IBM; and insurer Scottish Re Group.

Some of the brothers’ insider trading profits were diverted to two hedge funds Samuel Wyly set up: Maverick Capital and Ranger Capital, according to the complaint.

Tens of millions of dollars went into art, collectibles and jewelry, the SEC alleged, while nearly $100 million went into real estate including ranches and condominiums in Aspen, Colo. and a 100-acre horse farm outside Dallas.

A call to Ranger Capital and to an attorney representing the Wylys was not immediately returned.

  
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