Scottish Re Group Ltd (fka SKRRF)

[Stock]

Wyly Brothers Face SEC Fraud Charges

JULY 30, 2010
By FAWN JOHNSON

http://online.wsj.com/article/SB10001424052748703578104575397753590693916.html?mod=WSJ_business_whatsNews

The Securities and Exchange Commission on Thursday filed charges against two brothers, accusing them of reaping more than $550 million in undisclosed gains by trading stock in four companies through hidden entities in foreign jurisdictions.

The SEC said Samuel Wyly and Charles Wyly Jr. of Dallas set up a system of trusts and subsidiary companies in the Isle of Man and the Cayman Islands and that they sold more than $750 million of stock in four public companies for which they were corporate directors.

The SEC also charged their attorney Michael French and stockbroker Louis Schaufele III for their alleged roles in the scheme.

Mr. French was on the board of directors at three of the companies.

Attorneys for the Wyly brothers and Mr. French weren't immediately available for comment. A lawyer for Mr. Schaufele declined to comment

The public companies cited were Michaels Stores Inc., Sterling Software Inc., Sterling Commerce Inc. and Scottish Annuity & Life Holdings Ltd. (now known as Scottish Re Group Ltd.), the SEC said.

Representatives for the companies couldn't be immediately reached for comment.

The Wylys and Mr. French systematically and falsely created the impression that the Wylys' entire holdings and trading were limited to the fraction that they held and traded domestically, the SEC said.

The SEC complaint said the Wylys exploited their alleged illegal nondisclosure of their offshore-issuer securities to make a huge, bullish transaction in Sterling Software in October 1999 based on material and nonpublic information that they — while serving as the company chairman and vice chairman — had jointly decided to sell the company.

"The cloak of secrecy has been lifted from the complex web of foreign structures used by the Wylys to evade the securities laws," said Lorin Reisner, deputy director of the SEC's Division of Enforcement.

More

SEC Press Release on the Charges
http://www.sec.gov/news/press/2010/2010-137.htm

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Write to Fawn Johnson at [e-mail]

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