IRS Seeks To Recover $3B From Texas Billionaire, Late Brother
The Internal Revenue Service (IRS) is seeking to recoup $2.03 billion from Texas businessman Samuel Wyly and $1.19 billion from his brother’s estate. The massive bill owed by Sam Wyly and the estate of Charles Wyly is believed to be the biggest in history.
Brothers used trusts to avoid taxes
In court documents filed late Wednesday in the U.S. Bankruptcy Court in Dallas, the IRS claimed Sam Wyly owes $2.03 billion in back taxes, penalties and interest from income generated from offshore trusts he and his brother established over two decades ago. According to the agency, the estate of Charles Wyly, who died in a 2011 car wreck in Aspen, Colorado, owes $1.2 billion.
The IRS says the Wylys hid income by setting up overseas trust funds on the Isle of Man in the early 1990s to send a stream of $16 million per year to the brothers. According to reports, the trusts, built with money from the brothers’ various business interests, including Bonanza steakhouses, Michaels stores and a computer services chain they started in 1960s, are worth nearly $400 million. Federal investigators, including some from the SEC, say the brothers used the trusts to hide stock trades and avoid taxes.
The brothers built, grew and sold several companies, including Sterling Software, which they sold for $4 billion just before the dot-com bubble burst in 2000, and Michaels Stores, which was sold in 2006 for $6 billion.
Wylys lawyer terms IRS claims “unfair and absurd”
The SEC sued the Wylys in 2010, alleging that the brothers used proceeds from secret sales of stock in their companies to buy ranches and condominiums around Aspen. A Manhattan federal judge approved the SEC fines of $198 million against Sam Wyly and $101 million against the estate of Charles in February. Following the federal judge’s order, the IRS filed its claims.
Sam Wyly said the IRS figures are baloney. He indicated that he paid $160 million in taxes in the last 22 years, and his brother Charles paid $80 million and believed they paid all the taxes they owe.
Wylys’ lawyer, Stewart Thomas, called the IRS claims “unfair and absurd.” He said: “The IRS has known about these transactions for over 20 years, but they never informed the Wylys that they owe a penny of additional tax.”
Sam Wyly filed for bankruptcy in October, five months after a civil jury in New York found the brothers had engaged in a 13-year fraud that involved creating a web of offshore trusts and subsidiaries to hide stock sales.
As reported by ValueWalk, in 1993, Lee Ainslie, a tiger cub and founder of equity hedge fund Maverick Capital, started the hedge fund using $38 million in seed capital he received from Sam Wyly.
Lee Ainslie is a value investor particularly known for his investments in the technology sector. Last February, he said Hedge Funds bring an investment mindset to philanthropy that has helped enhance the outcomes of philanthropic investments.
