Even the rich face bankruptcy: after recent fraud accusations, former billionaire Texas investor Samuel Wyly has filed for Chapter 11.
Wyly last appeared on Forbes’s list of top 400 richest Americans in 2010, with a net worth of over $1 billion.
But now the tycoon says he does not have the assets to pay off nearly $300 million that U.S. regulators have charged him for his part in a fraudulent offshore scheme.
In his filings with a U.S. bankruptcy court in Dallas Oct. 19, Wyly explained that he had between $100 million and $500 million of both assets and liabilities. He also mentioned the “massive costs” of fighting the civil claims from the U.S. Securities and Exchange Commission.
Wyly and the estate of his late brother Charles, who died in a car accident in 2011, were ordered last month by a district judge in New York to pay damages of $187.7 million to the SEC after a jury found them liable for fraud.
The total, according to the SEC, should be $299.4 million — one of the largest amounts sought from individual defendants.
The SEC maintains that the Wylys’ offshore trusts still have millions of dollars in assets, stored in a complex system in the Isle of Man. The SEC also accuses the Wylys of netting $553 million in untaxed profits through more than a decade of hidden trades in four companies they controlled: Sterling Software, Michaels, Sterling Commerce and Scottish Re Group (formerly Scottish Annuity and Life Holdings).
The Chapter 11 filing would allow Wyly to maintain control of his business under a “reorganization.” It is similar to a Chapter 13 personal bankruptcy filing, which allows debtors to pay creditors over time, as opposed to liquidating all assets in Chapter 7 bankruptcy.
Wyly has made a career out of developing new companies, such as Bonanza Steakhouses, Sterling Software and Michaels Stores. Sterling Software sold for $4 billion in 2000; Michaels sold for $6 billion in 2006.
Wyly defended his business decisions by explaining in court filings that his companies were profitable investments for others that created as many as 200,000 jobs total.
Wyly’s bankruptcy case is Samuel E. Wyly, 14-35043, U.S. Bankruptcy Court, Northern District of Texas (Dallas).