NEW YORK, N.Y. – A federal appeals court on Friday partially upheld a decision to freeze assets of relatives of two Texas businessmen who have been ordered to pay about $300 million in penalties for securities fraud.
The judges upheld the freeze against nine relatives who, they said, received ill-gotten gains from trusts set up by Sam and Charles Wyly.
But the judges said the evidence against seven other relatives was less convincing, and they ordered a lower court to review those cases.
The Securities and Exchange Commission sued the brothers in 2010, claiming that they used trusts set up in the Isle of Man to hide more than $550 million in trading profits. After a civil-court jury trial, a federal judge last year ordered Sam Wyly and the estate of Charles Wyly, who died in 2011, to pay the SEC about $300 million including interest.
Two weeks later, Sam Wyly and Charles’ widow filed for bankruptcy protection, which in some instances can automatically halt collection of judgments.
The lower-court judge allowed the freeze, including assets transferred to family members, because the SEC was acting in its regulatory role. Her decision was partially upheld on Friday by a three-judge panel of the 2nd U.S. Circuit Court of Appeals in New York.
The Wyly brothers amassed a fortune owning companies including Sterling Software and the Michaels Stores craft chain.