SEC protests Wyly ranch sale
The U.S. Securities and Exchange Commission and the IRS are opposing bankrupt billionaire Samuel Wyly’s motion to sell his Woody Creek ranch because they believe he would hide sales proceeds in offshore accounts, according to court filings made earlier this month.
Wyly, who filed for Chapter 11 bankruptcy Oct. 19 in Dallas, has asked a judge to allow him to market the six-home, 244-acre ranch for $50 million.
Wyly wants to sell the ranch because it costs too much to operate, according to the March 17-dated motion, which also asks the court for authorization to pay $100,000 to longtime ranch manager Jay Yeary and $100,000 to his wife, Kristin, the ranch’s accounting manager, after the property sells. The SEC, which is owed $198 million by Wyly for hiding stock trades in offshore accounts, also opposes that.
“The SEC believes such a severance package is unnecessary to entice the Yearys to remain in their rent-free million-dollar home while earning a handsome salary and substantial benefits,” says the objection, which was filed April 16.
On paper, Wyly owns 1 percent of the ranch; the rest is owned by a shell company called Isle of Man. Wyly’s motion asks the court to allow him to provide an interest-free loan of $745,000 to Isle of Man to maintain the ranch until it is sold.
The SEC’s objection says that amount is too high, contending the ranch needs to be maintained “for show and sale and not for the Wyly family’s use and enjoyment … There is no reason to employ a weekly cleaning service to maintain the homes for showings. The estate should not pay for any of the homes’ telephones, cleaning, maintenance, Internet, cable, propane, waste removal, and other costs unless necessary to maintain the homes for sale. Family members who maintain homes on the ranch and enjoy all of its luxury rent free should contribute to its operating expenses.”
The SEC’s motion theorizes that Wyly is playing a shell game with the trust that owns the ranch and his offshore accounts.
“In reality, (Wyly) is treating the ranch as his own property, while maintaining that it is owned by the (Isle of Man) trusts,” the objection says, citing “Wyly’s ability to evade his creditors by placing his property in the name of offshore entities while fully enjoying all the benefits that flow from the ownership of that property.”
The SEC also says that “based on documents available to the SEC, if the ranch sells for (Wyly’s) $50 million asking price, the lion’s share of proceeds are destined to be returned to the offshore system which includes offshore trusts in which (Wyly) disclaims any ownership and does not include as property available to his creditors.”
On Tuesday, Wyly attorney Josia M. McDaniel filed a brief saying that the bankruptcy court would have to approve a sale agreement, casting doubt on the SEC’s concerns that the proceeds would be concealed. McDaniel also argued that the SEC’s suggestion that the ranch go to immediate auction would “be significantly destructive of value and contrary to the interests of all parties.”
Should the court approve the ranch listing, Craig Morris of Aspen Snowmass Sotheby’s International would market the property, according to court documents. Morris would stand to make a maximum commission of 4.5 percent.
Wyly and his brother Charles made most of their fortune through Sterling Software, the arts-and-crafts retail chain Michaels Stores Inc. and other business ventures. Last year, the SEC prevailed in its fraud suit, which went to a federal jury trial, which accused the brothers of hiding stock trades through offshore accounts, pocketing hundreds of millions of dollars.
