Born during the Depression in the northeast Louisiana plantation town of Delhi, population 3,000, Charles Wyly and his younger brother Sam have been inseparable since childhood: numbers 3 and 13 on the state-championship high school football team, business partners who turned ideas into billion-dollar companies, philanthropic champions and benefactors of politicians, including the Bush political dynasty. Now, the brothers are co-defendants in a massive securities fraud suit.

The reclusive pair, who both settled in Dallas, amassed extraordinary wealth after starting a software company during the computer industry’s infancy and investing their earnings in other technology firms, restaurant chains, clothing stores and energy companies.

They showered money on environmental causes, public broadcasting, arts groups, charities and Republican and conservative causes in Texas and nationwide.

But their wealth – and largesse – had a dark side, according to a fraud suit filed Thursday by the Securities and Exchange Commission. The charges, culminating a six-year probe, accused the brothers of creating overseas accounts and companies through which they made illegal trades, reaping more than a half-billion dollars in hidden profit.

The SEC probe was launched in 2004 after the agency was contacted by Bank of America, which sought to verify the Wylys’ offshore assets, only to have the brothers refuse to comply. The Wylys fell under government scrutiny again in 2005 in a probe of offshore accounts by a Senate subcommittee.

The Wylys deny the charges, according to a spokesman, who said the Wylys have relied on their lawyers and accountants in structuring business arrangements.

The fallout of the SEC suit rippled through Washington and the country Friday, with Democrats using the opportunity to paint Republicans as indebted to shady contributors.


The Democratic Congressional Campaign Committee called on Rep. Pete Sessions, R-Texas, who leads the National Republican Congressional Committee, to return donations from the Wylys.

The brothers –  who themselves have said they’ve given about $10 million to GOP candidates and causes since the 1970s – have given more than $160,000 to the committee and $35,000 to Sessions over two decades.

Republicans responded by pointing out that Democrats and their party committees have received donations from campaign accounts of Rep. Charles Rangel, the New York Democrat facing ethics charges.

Now in their mid-70s, Charles and Sam Wyly started their careers at IBM. As recalled on the family website, the brothers quickly excelled. Together they founded University Computer Co., and only two years later it went public, its stock rising year after year. The brothers used their earnings to invest in more businesses.

In the early 1990s, the brothers began to look into how they could use tax shelters, according to the Senate probe, which concluded in 2006 and found that the Wylys used offshore accounts to hide their wealth. No charges were brought.

The brothers used lawyers, brokers and others to transfer $190 million worth of stock options and warrants to nearly 60 offshore trusts and shell companies, according to the Senate probe. Then they exercised those options and warrants, generating $600 million in untaxed offshore dollars. They used the money to make loans to themselves, finance business ventures and acquire real estate and art.

According to the SEC, the offshore accounts were used for more than shielding the Wylys’ money from taxes. The brothers served on the boards of four companies in which they owned large stakes: Michaels, an arts and crafts chain; technology firms Sterling Software and Sterling Commerce; and Scottish Annuity & Life Holdings.

Large shareholders are required under federal securities law to disclose trades, because other investors often use such trading as a gauge of a company’s health. But by concealing their ownership of companies through their offshore accounts, the Wylys could trade shares in these companies without letting the public know, the SEC said.

Sometimes, the agency said, the Wylys used their secret ownership to trade based on insider information.

In 1999, the Wylys resolved to sell Sterling Software, a data-management company they’d founded. Without filing the required disclosures, the Wylys, via their offshore accounts, created a hard-to-track financial instrument that would let them bet that Sterling’s shares would rise, according to SEC.

Four months later, the behemoth Computer Associates bought Sterling for $4 billion, netting the Wylys more than $30 million in profit, the SEC said.


The Wylys have long been generous political donors, but they reached national notice in 2000 as prominent supporters of then-Texas Gov. George W. Bush’s presidential campaign. With Bush locked in a divisive GOP primary battle with Sen. John McCain, the Wyly brothers formed a third-party group, Republicans for Clean Air, which launched a $2 million TV ad campaign on the eve of the primaries in New York, Ohio and California.

The ads attacked McCain for voting against a federal solar power bill and praised Bush for signing an electric deregulation bill in Texas that required the cleanup of power plants that burn coal.

In 2002, they each gave $10,000 to Texans for a Republican Majority, the political action committee that then-U.S. House majority leader Tom DeLay and his associates used to raise and spend money to defeat Democratic candidates and elect Republicans to the Texas Legislature. DeLay and two associates continue to fight criminal charges related to that political committee.

In 2004, the brothers helped bankroll the famous Swift Boat campaign that helped re-elect the younger Bush in 2004 by tarring his Democratic opponent, Massachusetts Sen. John Kerry.

Through the Bush years, the Wylys gave generously to scores of GOP lawmakers and candidates, as well as to the Bush campaigns. But the Wylys – who together have 10 children and 17 grandchildren – rarely jockeyed for face time with candidates.

“They avoid the limelight,” said Jim Francis, another major Bush donor from Dallas. “They’re not formal. … Charles is quiet, is soft-spoken. Sam is soft-spoken also. They’re very gentle human beings.”

In Texas politics, they give big, but quietly, Austin-based political consultant Bill Miller said Friday.

“Their profile is pretty darn low,” Miller said. “I’m not saying it’s invisible because they’re proactive when they play. … They’re out there, but they’re subterranean.”

The Associated Press contributed to this report.