Wyly brothers lose bid to dismiss SEC fraud suit

(Reuters): The billionaire brothers Samuel and Charles Wyly have lost their bid to dismiss a US Securities and Exchange Commission lawsuit accusing them of orchestrating a $550 million securities fraud and committing insider trading. US District Judge Shira Scheindlin in Manhattan denied motions to dismiss the complaint in its entirety, on Thursday. She said the SEC adequately alleged the Wylys’ liability for fraud, and stated a claim for insider trading against the brothers. Following a six-year probe, the SEC last July accused the Dallas-based brothers of creating a sham web of offshore trusts in the Isle of Man and Cayman Islands to conceal 13 years of stock sales in four companies they founded or where they served as directors.

Scheindlin agreed the SEC adequately pled the concealment of sales in Sterling Software, Michaels Stores Inc, Sterling Commerce Inc and Scottish Annuity & Life Holdings Ltd. The judge also said the SEC may pursue a claim that the Wylys reaped $31.7 million from insider trading on Sterling Software after deciding in late 1999 to sell the company.

"A reasonable investor would almost certainly want to know information related to the Wylys’ planned sale," she wrote.

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