You've read by now that the Securities and Exchange Commission has charged Texas billionaire brothers Sam and Charles Wyly -- who happen to be prominent financial backers of conservative political causes and candidates -- with hiding $550 million in trading profits via a maze of offshore trusts and other entities. The brothers, repped by William Brewer of Bickel & Brewer, deny the charges.
What's notable for our purposes: In denying the allegations, the Wylys essentially throw up their hands and point at the advice they received from lawyers and financial advisers, according to The Wall Street Journal and Bloomberg. According to Brewer, "the Wylys have always received the advice and counsel of leading accounting and legal professionals. They have never been given any reason to believe the financial transactions in question were anything other than legal and fully appropriate."
So, who were the go-to lawyers for the Wylys? Chief among them was Michael French, whom the SEC also charged Thursday with helping the brothers set up the offshore trusts through which they made the trades in question. The SEC alleges that the Wylys used the offshore trusts to essentially hide the fact that they were making trades in companies they controlled or for which they served as directors -- the sorts of trades that must ordinarily be disclosed to investors who might view them as important market signals, the WSJ and Bloomberg say.
And what is known about French? Well, he was a partner at Jackson Walker from 1970 until 1992, when he left the firm to work almost full-time for the Wylys, according to a statement he gave in 2006 to a Senate subcommittee engaged in a general investigation of practices connected to tax evasion. The SEC alleges that 1992 was the year that the Wylys began to set up their offshore trusts.
The 400-page report (pdf) released by the Senate Permanent Subcommittee on Investigations concluded that French was during the 1990s "affiliated" with Jones Day, which provided tax and securities advice to Michaels Stores, an arts and crafts chain the Wylys owned. Robert Estep and John McCafferty at Jones Day were the key relationship partners for Michaels and the Wylys, the Senate report says. (Estep and McCafferty have not been charged by the SEC in connection with the allegations against the Wylys.)
Neither Estep and McCafferty are listed on the Jones Day website. A representative for the firm did not return calls or e-mails inquiring about the firm's apparent affiliation with French, who stopped representing the Wylys about ten years ago, court records show.
The Texas firm Meadows, Collier, Reed, Cousins, Crouch & Ungerman helped the Wylys develop an innovative new trust arrangement, the Senate report found. Lawyers from Morgan, Lewis & Bockius, including partner Charles Lubar, provided "a legal opinion regarding the creation" of various foreign trusts and additional tax advice, the Senate report found. In an e-mail to us, Lubar declined to comment, except to say the firm had "nothing to do with the securities side of the Wyly matters," and that the "tax issues are wholly independent."
A lawyer for French could not immediately be reached for comment.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
