DALLAS (CN) - Former Texas billionaire Sam Wyly hid how much stock he had in his companies during his divorce and should hand over half as he faces up to a $400 million SEC judgment, his ex-wife claims.
A philanthropist and contributor to Republican causes, Wyly, 77, of Dallas, made his fortune co-founding Sterling Software in 1981 and buying an interest in arts-and-crafts retailer Michaels in 1982. Sterling was sold for $4 billion in 2000 and Michaels Stores for $6 billion in 2006.
His ex-wife Torie Steele sued Wyly on Monday in federal bankruptcy court. She said Wyly was awarded "nearly all" of their community interest in the stock of both companies in 1991. They had been married for 13 years.
Wyly filed for Chapter 11 bankruptcy protection in October after a Manhattan federal jury ordered him and the estate of his deceased brother, Charles, to pay as much as $400 million for using offshore trusts to hide stock trades .
The SEC sued the Wylys in 2010, accusing them of making $550 million from more than 700 undisclosed transactions in 40 companies operated by Isle of Man trusts that shuffled money between the Cayman Islands and Dallas.
Steele claims the SEC's civil lawsuit shows she is a victim, as well. She says Wyly transferred to offshore trusts a "substantial majority" of the stock he received in the divorce, yet SEC filings indicate he owned "substantially more stock than was even awarded to him in the divorce" within two years after the transfer.
"The numbers do not add up. Wyly received his stock in Michael's and Sterling as compensation," the 11-page complaint states. "He was not awarded cash in the divorce that would have enabled him to purchase sizable amounts of shares in these companies. Thus, Wyly either failed to disclose all of his stock in Michael's and Sterling, had others hold the stock for him, or had the companies delay issuing stock to him until after his divorce with Steele was finalized."
Steele claims she is owed half of any undisclosed community property. She asked the bankruptcy court to determine the extent of her interest in the property. She is represented Ernest W. Leonard with Friedman Feiger in Dallas.
Wyly's attorney, Josiah Daniel with Vinson & Elkins in Dallas, did not immediately respond to a request for comment Tuesday evening.
This is the second time Steele has sued Wyly in bankruptcy court. She filed suit on Nov. 6, 2014 to protect her annual $500,000 alimony mandated by a July 1993 amended judgment in Los Angeles Superior Court.
After Wyly fell behind on payments, he agreed in May 2007 to guarantee the principal owed to Steele, "taking his chances with his acumen as an investor as opposed to risk incurring any further spousal support obligations," according to the Superior Court ruling, cited in Steele's Nov. 6 complaint to Determine Nondischargeability of Debt.
Steele's first complaint claims that Wyly listed her debt as unsecured based on that "contract."
Steele disagreed, claiming her debt is spousal support.
"The requirements imposed upon Wyly to provide Steele with guaranteed income of $41,666 per month is satisfied by payments from [investment firm] Maverick Stable Partners, L.P. on the last date of each month," the first complaint stated. "No payment, however, was received by Steele on October 31, 2014, as required by the Order Amending Judgment. This failure to pay confirms that Wyly considers his obligation to Steele as a dischargeable 'contract' debt and not a debt for a domestic support obligation."
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