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Details on Wyly charges

Sam Wyly

Sam Wyly Credit: AP

Sam (left) and Charles Wyly, the billionaire Texan investors accused this week of a massive insider trading scheme, secretly made $37.1 million from a single transaction involving a software company about to be bought by CA Technologies, federal court documents show.

Islandia-based CA bought the Wyly-run Sterling Software in February 2000 for $4 billion.

But that deal was preceded by a shadowy transaction four months earlier through a Cayman Islands shell company, the Securities and Exchange Commission said in a Thursday 78-page U.S. District Court complaint. In the October 1999 offshore deal the Wyly brothers acquired the equivalent of 2 million shares of Sterling Software at $20.36 a share, the SEC said. By then the Wylys already knew they would sell Sterling Software to CA, and were illegally trading on knowledge not available to the public, the SEC said. The day the Sterling Software sale was announced on Feb. 14, 2000, the share price closed at $36.25 — and the Wylys quietly pocketed the difference, the SEC said.

The Wylys used similar techniques to profit from Sterling and three other companies through dozens of sham trusts in the Caymans and the Isle of Man, the SEC said. There were 40 transgressions for Sterling Software from 1992-1999, the SEC said.

The Wylys wanted to “pull some gains out” without sending “any bearish signal to the market” that might depress stock prices, the SEC said.

The brothers hid their vast holdings, the SEC said. For example, on Jan. 5, 1996, the Wylys’ public position in Sterling was 1.5 million shares, or 5.6 percent of shares outstanding. But in truth on that day their ownership amounted to nearly 6 million shares, or 22 percent of the company, mostly held in Wyly-controlled offshore trusts, the SEC said.

They spent proceeds on luxuries and property, the SEC said.

The Wylys dispute the allegations. A CA spokeswoman said the company had no comment.

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