‘Wylys Lied’


“The evidence is clear the Wylys lied, concealed and evaded their way to hundreds of millions of tax-free profits from Isle of Man trusts they controlled,” IRS lawyer Jonathan Blacker told the court. He said the brothers used the trusts as their “personal tax-free piggy bank.”

He said Sam Wyly portrayed himself as an Eagle Scout and patriotic American, but the reality was he paid lawyers to research whether giving up his U.S. citizenship would absolve him of tax liabilities. Wyly also told his lawyer that if the government ever challenged the offshore trusts he would “litigate with the IRS for years and then settle for pennies on the dollar,” Blacker said.

The IRS is seeking $1.4 billion from Samuel Wyly and $834 million from his sister-in-law, with penalties and interest accounting for 80 percent of the totals, according to a Jan. 25 government brief. The tax agency chopped about $1 billion off its initial claim as a result of disclosures the Wylys made on the eve of the trial, according to the brief.


Fortune Threatened


Those disclosures showed the “availability of other tax attributes” that cut some deficiencies the IRS had originally identified, the agency said, adding that it had been seeking the information since last year. The remaining IRS claims still threaten to wipe out the Wyly fortune.

The government alleges the brothers’ 14 Isle of Man trusts and 40 subsidiary companies were used to dodge taxes on hundreds of millions of dollars of stock options and warrants. The Wylys used the untaxed principal and gains to buy luxury houses in Dallas, ranches and a condo in Colorado, a Texas horse ranch and an art gallery, as well as art, collectibles, antiques and jewelry, according to the U.S.

Charles and Dee Wyly bought jewelry worth $4.3 million, including a $735,000 diamond necklace and a $667,000 diamond ring, according to the IRS. Loans totaling $140 million were used to bring untaxed funds onshore for use by the brothers or their children, or for new businesses they were establishing, the IRS said.


No Intent


Dee Wyly “did not know enough about her husband’s tax situation to be able to form the intent to commit tax fraud,” according to a brief filed by the family. She had been married to Charles for 56 years when his Porsche was struck by another vehicle in western Colorado, killing him at the age of 77.