Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
SEC finds Samuel Wyly's bankruptcy budget 'staggering'
Author: Joel R. Glucksman
Date: November 4, 2014
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Texas tycoon Samuel Wyly, 80, has been accused of attempting to deplete his domestic assets in order to impede the ability of U.S. creditors to collect in his bankruptcy.
Wyly filed for protection under Chapter 11 of the bankruptcy law earlier this month, after claiming that he does not have the assets to pay the $300 million that he owes to U.S. regulators for his role in a fraudulent offshore scheme, according to Reuters. He was found liable for fraud in May, which led to U.S. District Judge Shira Sheindlin ordering him and the estate of his late brother Charles to pay damages of $187.7 million plus interest to the U.S. Securities and Exchange Commission. The SEC has since said that the total, including interest, should be $299.4 million, making this one of the largest awards ever sought from an individual defendant.
In a document filed with the U.S. bankruptcy court in Dallas, Wyly listed both assets and liabilities between $100 million and $500 million, according to the news source. As for the reason that he is seeking Chapter 11 protection, Wyly cited the cost of fighting civil claims from the SEC.
In a more recent piece by Reuters, it was reported that a lawyer for the SEC is now criticizing Wyly’s proposed bankruptcy budget. The budget includes almost $7,000 per month for supporting elderly friends and family members and $32,000 per month for assistants.
“We are concerned that the debtor is attempting to deplete domestic assets and making it harder for U.S. creditors to collect,” said Angela Dodd, an SEC lawyer, according to the news source.
Meanwhile, the SEC and the Wylys are contesting whether the hundreds of millions of dollars that remain in offshore accounts should be subject to the bankruptcy. The Wylys argue that this money belongs to their children and other beneficiaries, while the SEC noted that a jury has found that the Wylys control the money.
Late last week, according to Reuters, U.S. District Judge Shira Scheindlin said that she was “not very happy” about the bankruptcy filing and would order Wyly’s assets temporarily frozen. The judge said she would also freeze the assets of Wyly’s brother’s estate, as well as funds held in offshore trusts at the center of the lawsuit by the U.S. Securities and Exchange Commission.
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