Texas Billionaires, Major GOP Donors, Charged With 'Insider' Stock Fraud

The Securities and Exchange Commission has charged Dallas billionaires Sam and Charles Wyly -- generous donors to conservative causes -- with using secret overseas accounts to reap more than $550 million in profit through illegal stock trades.

The government said the brothers set up a sham network of companies and trusts in the Cayman Islands and on the Isle of Man, off the British coast, to trade more than $750 million of stock in four public companies where they served on corporate boards. In so doing, they failed to make the public disclosures required of "corporate insiders," the SEC said.

"The cloak of secrecy has been lifted from the complex web of foreign structures used by the Wylys to evade securities laws," said Lorin L. Reisner, the SEC's deputy director for enforcement. "They used these structures to conceal hundreds of millions of dollars in gains in violation of the disclosure requirements for corporate insiders."

The SEC also charged the Wylys' lawyer Michael C. French and stockbroker Louis J. Schaufele III in the scheme. The Wylys' and French "knew or were reckless in not knowing their legal obligations as public company directors and greater-than-five-percent beneficial owners," the SEC said, "The laws require such persons to report holdings and trading in their companies' securities."

Through a lawyer, Charles Wyly, 76, and Sam Wyly, 75, denied all of the charges.

According to a Center for Responsive Politics reported by the Washington Post, Charles Wyly and wife Dee have contributed more than $1.5 million to Republican candidates, party committees and conservative political action committees over the past two decades. Sam Wyly and his spouse, Cheryl, gave more than $970,000 during the same 20-year period.