(Bloomberg) Former billionaire entrepreneur Samuel Wyly will have to move out of his $12 million Texas mansion unless he miraculously wins a "home run" appeal of a fraud case in Manhattan, a federal judge ruled.
The ruling Wednesday by U.S. Bankruptcy Judge Barbara Houser in Dallas was a victory for the U.S. Securities and Exchange Commission and the Internal Revenue Service, which challenged Wyly’s attempt to keep the property under a Texas homestead law intended to keep people from winding up homeless after filing for Chapter 11 protection. Houser also rejected Wyly’s attempt to shield $249 million in offshore annuities, perhaps a bigger setback, as the 81-year-old seeks to avoid becoming destitute when the case eventually ends.
Wyly’s lawyer, Josiah Daniel, said the ruling wasn’t significant and declined to comment further.
Wyly and his brother’s widow, Caroline “Dee” Wyly, filed for bankruptcy after the SEC in 2014 prevailed in a federal trial in New York accusing the brothers of using a web of offshore funds to hide hundreds of millions of dollars as they got rich building companies including the arts-and-craft chain Michaels Stores Inc. Charles died in a car accident in 2011.
Houser, tasked with setting the amount of the agency’s claims after the SEC victory, ruled earlier this week that Wyly and his late brother’s estate owe the IRS a total of $1.1 billion.
The agencies in March had balked at Wyly’s attempt to keep the "urban homestead" property, which is under 10 acres, calling it "astonishing" that he’d cling to a home worth 57 times the average cost of a single-family house in Dallas.
The parties agreed Wyly can keep about $155,000 once the property is sold, which is about what he paid for the mansion when he bought it in 1966, according to the ruling. The parties were ordered to try to reach an agreement in the next 10 days on how long Wyly, who got rich building businesses including the Michaels Stores Inc. arts-and-crafts chain, can remain in the home.
As for the annuities, the agencies argued Wyly’s offshore funds at the center of the dispute were specifically set up to protect assets he was hiding from the authorities, and that he shouldn’t be allowed to benefit from the process after losing the fraud trial.
The case is In re Samuel Evans Wyly, 14-35043, U.S. Bankruptcy Court, Northern District of Texas (Dallas).
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