SEC Accuses Billionaire Brothers Of Fraud The SEC has sued two Texas billionaire brothers known for their support of conservatives, claiming they misled investors to the tune of hundreds of millions of dollars.
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SEC Accuses Billionaire Brothers Of Fraud

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SEC Accuses Billionaire Brothers Of Fraud

SEC Accuses Billionaire Brothers Of Fraud

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The Securities and Exchange Commission has filed suit against two billionaire brothers from Texas. According to the SEC, Sam and Charles Wyly used phony off-shore business entities to mislead investors, and to reap hundreds of millions of dollars in profits - money they did not disclose, according to the SEC -over more than a dozen years of insider trading.

The Wyly brothers are also known for their support of conservative causes, generally, and specifically for helping former President George W. Bush.

Joining us to talk about the case is NPR's Peter Overby. And, Peter, let's start with the basics: Not a criminal indictment, it's a civil suit brought by a regulatory agency to enforce a set of rules.

PETER OVERBY: That's right. And the short version of what the SEC is alleging is that the Wyly brothers invested in four companies. They hid a lot of their holdings in a network of other companies on the Isle of Man and in the Cayman Islands. So with the other investors not knowing the true picture of their involvement, they were able to pull off transactions that wouldnt have worked otherwise.

And I just want to mention that one of the companies involved here - three of whom you haven't heard of - the fourth one was Michael's, the arts and crafts store that seems to be at almost every mall in America. They sold it in 2006, it's not under their ownership anymore but it's listed in the lawsuit as one of the vehicles.

SIEGEL: Now tell us about the Wyly brothers, who, through their lawyers, have said that the law is being misapplied here, I gather, and they deny any wrongdoing. Who are they?

OVERBY: They are from Dallas. They started out in the 1960s with a business-to-business computer company and they went on from there. They are now hugely wealthy. Sam Wyly - this is a twist - Sam Wyly is the founder of Green Mountain Energy. They sell what they call 100 percent pollution-free energy in New York City and Texas. So they're not exactly the typical Texas billionaires.

SIEGEL: Not Texas oilmen but green Texans, you say.

OVERBY: At least one of them.

SIEGEL: They say that they have not defrauded anyone, the SEC is misapplying the law, and they have been advised by the best lawyers and the best accountants there are.

OVERBY: Thats right. The SEC investigation went on for six years and their lawyers suggest that the lawsuit is an after-the-fact justification for those six years spent. He says the Wylys expect to be vindicated. And possibly a more likely outcome would be a negotiated settlement, kind of the way the SEC just a couple of weeks ago settled a lawsuit against Goldman Sachs.

SIEGEL: The Wylys have an extensive and interesting history as political donors. What is the political side of the Wyly brothers?

OVERBY: Heavily Republican. They have given millions of dollars to Republican candidates and committees over the years. They were both big fundraisers for President George H.W. Bush. Charles was a fundraiser for President George W. Bush.

They both gave dollars $10,000 to Swiftboat Veterans for Truth in the 2004 campaign attacking...

SIEGEL: The group that went after John Kerry.

OVERBY: Thats right. And Sam Wyly, after he left an imprint on the Campaign Finance Laws, because he had an independent group going after John McCain in the 2000 Republican primaries - group called Republicans for Clean Air. And when Congress found out that you could run these attack ads without saying who you were, they changed the law to require disclosure.

SIEGEL: Well, Peter Overby, thank you very much.

OVERBY: Glad to do it.

SIEGEL: NPR's Peter Overby on the SEC suit against Sam and Charles Wyly.

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