Ex-Billionaire Owes $3.2 Billion in Taxes

by Bruce Givner on May 5, 2015

On April 17, the Internal Revenue Service (IRS) delivered a tax bill against former Dallas billionaire Sam Wyly, who helped build the company Micahels Stores Inc., and the estate of his late brother, Charles Wyly, for over $3 billion. The documents, which were filed with the US Bankruptcy Court in Dallas, claim that Sam Wyly owes $2.03 billion in back taxes, penalties, and interest generated from trusts established by the brothers, while the estate of Charles Wyly owes $1.2 billion.

Earlier, a federal jury in Manhattan found Wyly and his late brother had perpetrated an offshore stock-trading fraud that generated $550 million in illegal profit over more than a decade. A judge stated that Wyly owes the Securities Exchange Commission (SEC) an additional $200 million on top of the $2 billion owed to the IRS.

Furthermore, Sam Wyly was accused by regulators of hiding offshore ownership of a luxury ranch near Woody Creek, Colorado, in a possible attempt to avoid paying creditors as much as $50 million in future sales proceeds. According to the SEC’s April 16 filing in a federal bankruptcy court in Dallas, the plan to sell the 244-acre property risks moving cash offshore before debts are paid. Accordingly, the SEC asked a judge to deny the proposed sale procedure. The IRS joined the SEC’s objection, saying that Wyly’s “silence” regarding whether the sale proceeds would move offshore was troubling. Wyly has stated that he owns about 1% of the ranch, with the rest owned by a trust in the Isle of Man. The property isn’t listed in court papers as part of Wyly’s estate, and he has denied ownership of the trust that bought the ranch for $11 million in 1999.

According to the SEC, Sam Wyly and his family “obtained the $11 million property, constructed several multimillion-dollar homes that they enjoy rent free, and use the properties with minimal personal expense.” Wyly’s lawyer, Josiah Daniel of Vinson & Elkins LLP in Dallas declined to comment on the ownership of the offshore trust, though he stated it would be addressed in a later filing.

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