Bankrupt ex-billionaire Samuel Wyly was accused by regulators of hiding the ownership of a luxury Colorado ranch in a possible bid to avoid paying creditors as much as $50 million in future sale proceeds.
Wyly’s proposed plan to sell the 244-acre property -- the site of several mansions used by him and his children -- risks moving cash offshore before debts are paid, the Securities and Exchange Commission said in a filing Thursday in federal bankruptcy court in Dallas.
Wyly, who helped build companies including arts-and-crafts retailer Michaels Stores Inc., has said he owns about 1 percent of the ranch near Aspen and Snowmass, with the rest owned by a trust in the Isle of Man.
The SEC seeks to recover about $200 million from Wyly after winning a fraud lawsuit against him last year. It asked a judge to deny Wyly’s proposal while saying it supported a sale of the ranch on more transparent terms.
The property, Rosemary’s Circle R Ranch near Woody Creek, Colorado, 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, the SEC said.
Wyly asked the bankruptcy judge to approve hiring Sotheby’s International Realty to find a buyer for the ranch.
“The debtor’s actions with regard to the ranch underscore his ownership and control over the property,” the SEC said.
“By using offshore funds, 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,” the agency said.
The IRS joined the SEC’s objection to the sale process, saying it was troubled by Wyly’s “silence” regarding whether the sale proceeds would move offshore.
Wyly’s lawyer, Josiah Daniel of Vinson & Elkins LLP in Dallas, declined to comment on the ownership of the offshore trust, saying it would be addressed in a later filing.
The SEC also said Wyly’s proposed budget for the property was inflated, risking burning through cash that could go to creditors.
The ranch, located at a high elevation in the Rocky Mountains, includes six new homes, various historic structures, a barn and other outbuildings, Wyly said in his proposal.
Wyly’s children, the agency said, live in customized homes on the ranch without paying for maintenance, utilities, snow removal, cleaning or Internet.
Wyly’s daughter and her family live on the property year-round, and yet she “does not even pay to have her own pool cleaned and maintained,” the SEC said. Wyly lives in Dallas.
A federal jury in Manhattan in May found Wyly and his late brother Charles Wyly perpetrated an offshore stock-trading fraud that generated $550 million in illegal profit over more than a decade. A judge said Wyly owes the SEC about $200 million, while the IRS says it’s owed $2 billion in unpaid income taxes, interest and penalties.
Charles Wyly’s widow, Caroline “Dee” Wyly, also filed for bankruptcy after losing the SEC lawsuit. She also has a home in Woody Creek, valued at $28 million, court papers show.
The bankruptcy case is Samuel E. Wyly, 14-35043, U.S. Bankruptcy Court, Northern District of Texas (Dallas).