Sam Wyly

Samuel E. "Sam" Wyly
Born (1934-10-04) October 4, 1934
Lake Providence
East Carroll Parish
Louisiana, USA
Residence Dallas, Texas, USA
Alma mater

Louisiana Tech University

University of Michigan, MBA
Occupation Businessman; Philanthropist; Author
Political party Republican mostly
Spouse(s)
  1. Rosemary Wyly (married 1960-1976, divorced)
  2. Victoria Steele Wyly (married 1978, divorced)
  3. Cheryl Wyly (married 1994, divorced)
Children Evan, Laurie, Lisa, Kelly, Andrew, Christiana
Parent(s) Charles, Sr., and Flora Wyly
Relatives Charles Wyly (brother)

Samuel E. Wyly, known as Sam Wyly (born October 4, 1934), is an American entrepreneur and businessman, author, philanthropist, and major contributor to conservative candidates. In 2006, Forbes magazine estimated his net worth at $1.1 billion. He was nine years on the Forbes 400. Wyly's memoir, 1,000 Dollars & an Idea, was published in September 2008.[1] He is of Scots, Irish, Welsh and English descent. His forebears came to America in the 1600s, 1700s, and 1800s. His last book was The Immigrant Spirit: How Newcomers Enrich America, and his May 2018 book is Dallas Got It Right!, co-authored with Laurie Matthews and Andrew Wyly.

Early life and education

Wyly was born in Lake Providence, which Mark Twain described in Life on the Mississippi as, "the first distinctly Southern-looking town" as you go downriver. It is the parish seat of East Carroll Parish in northeastern Louisiana part of the pre-Civil War cotton kingdom as portrayed in the film Gone with the Wind. Descended from a long line of Presbyterian and Episcopalian ministers, college founders, and teachers. His Wyly grandfather, who went to the 1893 Chicago World’s Fair where Nicola Tesla’s electricity was first displayed, was a lawyer who managed plantation assets and helped poor Black convicts get paroled from Angola Prison. His Evans Granddad was a doctor who dealt with everything from malaria to Saturday-night knife fight results to births in clapboard cabins on farms.[2] He began working at an early age, helping his father, Charles Wyly, Sr., and mother, Flora Wyly, to publish a weekly newspaper, The Delhi Dispatch in Richland Parish. He sold advertising, wrote stories, sent telegrams for oil and gas guys, folded and addressed the finished papers, delivered daily newspapers from the bus stop on Highway 80, and cleaned the printing presses.[3][4] In the summer, he rough necked in the Delhi Oil Field. He began working at an early age, helping his father, Charles Wyly, Sr., and mother, Flora Wyly, (who joined The Daughters of the American Revolution the year he was born), to publish a weekly newspaper, The Delhi Dispatch in Richland Parish and run the Western Union Telegraph Agency.

In high School he played nose guard on a football team that became state champions. His Cherokee teammate, Monroe Fowler, said, "We were 'oil field trash' who moved to Delhi with the big oil discovery. But, when Bubba took me to his home, I could feel the gentility of the old South."

Following high school, Wyly went to Louisiana Tech University[3] partly working his way through college by selling class rings.[4] His brother, Charles, had a football scholarship that paid tuition, room, and board, and laundry, plus $15 a month. Sam was elected class president and student senate president and was on the college debate team arguing whether America should "recognize Red China." In 1952, known then as "Bubba" Wyly, he was the head page in the Louisiana House of Representatives in Baton Rouge, recalled one of the young men who worked under his supervision, Jasper "Jake" Smith, III, son of State Representative Jasper K. Smith of Caddo Parish.[5] The Wyly brothers later honored one of their Tech professor, Robert C. Snyder, of the English department, with an endowed chair.[6] And in 1973, they endowed Louisiana Tech with the sixteen-story Wyly Tower of Learning with profits from University Computing stock.

Wyly earned an MBA at the University of Michigan in Ann Arbor, where he dropped the "Bubba" and became "Sam." He was Michigan's first Paton scholar. He took their first course taught in computers. He is one of a few Michigan Business School graduates who became billionaires. He coded programs in machine language on the IBM 650 computer and learned the von Neumann concept in which both the data and the program are stored in the same memory. He saw the computer as being a productivity tool as powerful as the tractors, trucks and electricity that were increasing the productivity of American farm workers as much as 100 to one, and sending farm boys and girls to work in the cities.

Business career

After Michigan, Wyly went to Air Force Boot Camp in San Antonio and to Dallas for a job with IBM[2] He and Ross Perot were classmates at IBM’s education center. Three and a half years later, at the time when Fortune Magazine described the computer industry as "IBM and the seven dwarfs," Wyly left IBM for Honeywell, (one of the dwarves), establishing their computer business in Dallas, Ft. Worth, and Oklahoma.[4] When Honeywell rejected his plan for a new technology computing center to replace the obsolete Univac at SMU, he quit to do it himself. In November 1963, the month that Wyly Started his company,[citation needed] President Kennedy was shot in Dallas. Sam watched Jack and Jackie’s parade from the downtown Neiman Marcus store.

He first saw himself as a computer guy, then as an entrepreneur, and then as an author.

Wyly's wealth comes from businesses that he founded and developed, or purchased and expanded:

  • 1963: Founded University Computing Company (UCC), to serve engineers, scientists, and researchers. He capitalized the company with his own $1,000 plus commitments from customers including Sun Oil Company, Texas Instruments and SMU, and $650,000 borrowed from the First National Bank in Dallas, now Bank of America, on the cover of Wyly’s Dallas Got It Right!.[4] The company went public in September 1965, the month his twin daughters, Laurie and Lisa, were born.[2] In four years, UCC stock gained 100-1 over its IPO price. Lots of employees and early investors became millionaires. By 1969, it was one of only five companies headquartered in Texas with a market capitalization of $1 billion or more.[7]
  • 1967: Bought the ten store restaurant chain Bonanza Steakhouse which served steak and potatoes and salad for $2.[3] Sam ran TV ads using the actors who played "Hoss," "Little Joe," and "Pa Cartwright" from the TV series Bonanza. Bonanza grew from 10 to 600 restaurants[3] when he sold it to John Kluge, a German-born entrepreneur, then the richest man in America.
  • 1968: Acquired Gulf Insurance[8] to help fund his biggest dream - a nationwide digital network to compete with AT&T, then the national telephone monopoly. Their plant was based on analogue technology—good for voice calls—but, too slow for computer to computer talk. Gene Bylinsky of Fortune wrote, "Sam Wyly builds a telephone company for computers." In his 1968 keynote speech to the Spring Joint Computer Conference in Atlantic City, Wyly said, "The computer user has dialed into a busy signal."
  • 1968: Launched a takeover bid for Western Union, the only company that then had nationwide right of ways to compete with AT&T with a "highway for computers." Today, it's called the internet. His effort was foiled by a New York State law that protected the monopoly from competition. That delayed digital competition in America, but not for long.[1]:94 Today, we have Verizon, Apple, Google, Facebook and the cable companies, et al.
  • 1968 Co-founded Earth Resources Company, an oil refining and silver mining company, that built a refinery in North Pole, Alaska to make jet fuel for airplanes flying to Asia over the Arctic Sea. The Memphis refinery "got the lead out" of gasoline and fueled the fast growth of Federal Express and overnight air mail delivery
  • Late 60s and early ‘70s a trustee of SMU and director of First National Bank—then youngest at the time for both.
  • 1972: Built a computer keyboard plant to create jobs for Arapaho and Shoshone workers on the Wind River Indian Reservation in Wyoming.[8]
  • 1973: He divided UCC into four companies, including Datran, which began construction of a US digital network to transmit data among 27 American cities in direct competition with AT&T.[8] He was unable to capitalize Datran at $400 million and Wall Street disappeared for over a decade when there weren't any technology IPOs for 14 years. Venture capital investing shrank 95 percent. Home mortgage rates rose to 20 percent. Wyly liquidated Datran in bankruptcy in 1976 and filed a $300 million anti-trust suit against AT&T for abuse of its monopoly power and predatory pricing. The courts and Congress forced the bust up of the monopoly, citing Datran as a major reason.[5] Unable to afford lawyers' fees, he engaged Texas lawyer, Bob Strauss, — later Chairman of the Democratic Party — to fight the legal battle for a contingency fee of 28 percent of any winnings. Four years later it was the largest fee ever paid to a Dallas firm. The monopoly was busted into eight companies competing with each other and they paid a $50 million settlement to Wyly's company. FCC attorney said Datran’s effort was a major key to this USA policy change toward free market competition versus regulated monopoly. Strauss later became President Bush 41's Ambassador to Russia and AT&T ultimately headquartered in Dallas.
  • 1981: Co-founded Sterling Software,.[9] Focused on mainframe software and sold in 2000 for $4 billion, [3] and its spin-off of Sterling Commerce sold to AT&T for another $4 billion.
  • 1982: Bought 10 arts-and-crafts Michaels stores.[3] Today over 1,300. In July 2006, Bain and Blackstone purchased the company for $6 billion. Sam’s sale protected shareholders from massive losses in the Crash of 2009.[2]
  • In 1990, co-founded hedge fund Maverick Capital, which by 2003 had about $8 billion in assets. Beginning in 1993, his son Evan, a Maverick co-founder, and money manager Lee S. Ainslie III managed the fund.[10]
  • In 1996, IPOed 19 percent of Sterling Commerce for $288 million in the "dot.com" boom of 1995-2000. Paid out the other 81 percent to Sterling Software shareholders as a tax-free dividend. Reference Sterling Software SEC filings.[1]:{{{1}}}
  • In 2000, sold Sterling Commerce to AT&T for $3.9 billion. Five years later in 2005, AT&T resold the company for $1.4 billion to IBM. Wyly protected his shareholders from a $2.4 billion loss. (Reference SEC filings by Sterling Commerce and IBM.)
  • In 2002, co-founded Ranger Capital, a fund focused on small-cap stocks.[1]:{{{1}}}
  • As of 2006, Wyly was co-founder with son, Evan, the largest clean-energy producer Green Mountain Energy.[3] replacing electricity made by older, dirty, coal plants with cleaner natural gas, wind, and solar power. Green Mountain became the clean energy supplier to the Empire State Building in New York. After big losses in the states of California, Pennsylvania and Ohio—whose state lawmakers favored electricity monopolies over competition. Green Mountain Energy became very profitable in Texas—a more free-market state. Wyly's management team under president Paul Thomas convinced hundreds of thousands to, "Choose wisely—It's a small planet!" Today's electricity prices are dramatically lower in Texas than in the other three big states, and Texas has dramatically reduced air pollution.
  • In 2006 Wyly also was the largest investor in the online social networking company Zaadz.com at an estimated 1.5m.
  • In March 2007, Forbes magazine estimated Wyly's net worth to be $1.1 billion.[11] He was on the “Forbes 400” for nine years.[3]

Books

Cheryl and Sam Wyly purchased Explore Booksellers and Bistro in January 2007, ending concern by Aspen, Colorado locals that the only book store would be converted into condos.[6]

Sam wrote his memoir, 1,000 Dollars & An Idea, in 2008.[7] He made book talks to college and high school students.

His illustrated biography, Beyond Tallulah, How Sam Wyly Became America's Boldest Big-Time Entrepreneur, by Dennis Hamilton (Melcher Media) was published in 2011.[8] Hamilton began writing about Sam in software journals in the 1970s.

Sam and his son, Andrew Wyly, (with a Foreword by Walter Isaacson), wrote Texas Got It Right! in October, 2012 (Melcher Media).[15] The book explains why California, New York, and the Rust Belt states are losing jobs to Texas and the Southern and Rocky Mountain states. In 2014, Dallas added more jobs than any other city, and the 17-county DFW metro was America’s fastest growing city; Frisco the fastest growing town.

Politics

In 1968, Sam Wyly was a delegate to the Republican Convention, at the request of Chuck Percy, an Illinois Senator and former CEO who he met at a “Young Presidents’” event. Percy lost, so Wyly became Chairman for the "Nixon For President" campaign in Texas. It was the first time that Republican presidential money had matched that of Democrats in Texas, which had been part of the "Democratic Solid South" since the Civil War.[1]:{{{1}}} Nixon and later President Ford named Wyly chairman of a commission to foster businesses in mostly Black neighborhoods. Wyly had earlier worked with Joe Kirven, head of the Dallas Negro Chamber of Commerce, on a similar effort.

In 1998, he had an excruciating choice to make when his friend, Perot, and his friend, Bush '41, both ran for President. Perot got 20 percent, but with two Texans on the ballot, "another Bubba" from Texarkana—Bill Clinton—won the White House. Perot, Clinton, and Wyly all grew up less than 100 miles from each other in Louisiana, Arkansas and Texas.

In March 2007, commenting on the purchase of a local bookstore by Wyly and his wife Cheryl, the Aspen Times noted that the Wyly family "has been known not only for its philanthropic efforts, but also its large contributions to conservative political campaigns and candidates."[9] Sam backed George H. W. Bush for president in 1980 and 1988. Sam backed George W. Bush's run for Congress in West Texas in 1978 and for governor in 1994 and president in 2000 and 2004.

Philanthropy

Wyly and his late brother, Charles, spent more than $160 million on a wide range of charities in the last 25 years.[10] Earlier, in 1968, he set up the Sam Wyly Foundation to help black business owners.[4][4] It was run by Alan Steelman, who later became the first Republican elected from the 5th district of Texas, a seat now held by Jeb Hensarling, who worked with Wyly at Green Mountain Energy and Maverick.

At the request of Bob Wilson (husband of author Laura Wilson and dad of Hollywood’s Andrew, Luke and Owen Wilson), manager of Dallas's PBS channel 13, Wyly provided local matching money to get a Ford Foundation grant for the creation of, "The Jim Lehrer News Hour." Lehrer told The Aspen Institute, "Without Sam Wyly, there would be no News Hour." Lehrer was the sole impartial moderator for 16 presidential debates.

With Charles, he funded the 16-story Tower of Learning at Louisiana Tech, designed by the Bastrop architect Hugh G. Parker, Jr., in memory of their father (1973) and a $10 million gift for Sam Wyly Hall, at the University of Michigan (2000).[22] Has been a significant supporter of Salvation Army, Deaf Action Center, Human Rights Organizations, animal shelters in Dallas and Hillsboro, Texas, and Aspen, health care for people surviving with Lou Gehrig's disease, and the Aspen Writers' Foundation.[16] Supported the Dallas Theater Center on Turtle Creek for decades, and were key contributors to the Wyly Theatre in downtown Dallas. In 2015 – Founded WylyBooks Company, a nonprofit to fund his storytelling about America's history and future.

Federal Government Lawsuits

In 1979, Wyly settled Securities and Exchange Commission (SEC) charges that he made undisclosed payments to associates to buy up company bonds as part of a plan to stave off bankruptcy for University Computing after the $100 million Datran loss. He settled without acknowledging any wrongdoing.[11]

In August 2006, the Dallas Morning News reported that Sam and Charles Wyly were again under investigation by the SEC, a grand jury in Dallas and a grand jury in New York,[12] regarding their use of potentially illegal offshore tax shelters. No criminal charges were made by either Grand Jury. Senate investigators allege that the Wyly brothers used the offshore trusts to buy $30 million worth of artwork, jewelry, furniture and other items for their personal use. The Wyly brothers denied any wrongdoing, and stated that they just followed the advice of their lawyers and CPAs.[12]

On July 29, 2010, the SEC charged Charles and Sam Wyly with fraud for violating federal securities laws governing ownership and trading of securities by corporate insiders. Sam was surprised with the charges, because historically such cases were brought when public investors lost money. In these companies— Michaels, Sterling Software, and Sterling Commerce—public investors had profits well above the averages.

The Wyly brothers made an immense fortune for themselves, employees and stockholders through investments in Michaels Stores and several software companies. They had been accused of avoiding their tax obligations by transferring stock options in Michaels and Sterling Software Inc. to offshore trusts after receiving advice from a lawyer who promoted foreign trusts as a method of asset protection and tax deferral.[13][14][15][16] On May 12, 2014, a civil jury in New York found the Wyly brothers liable on counts for use of offshore trusts.[17] On July 11, 2014, Sam Wyly and his late brother Charles, were found not liable for insider trading by a U.S. Judge in New York.[17][18]

On October 19, 2014 Sam Wyly filed for Chapter 11 bankruptcy,[19] having lost one of the cases brought by the SEC,[20][21] and wanting to force the IRS to “put up or shut up” about any taxes he owed related to his family’s offshore trusts. The IRS had been auditing his tax returns for a decade without ever telling him whether he owed any additional taxes.[22]

In 2016, Wyly settled with the SEC, entering into a settlement agreement under which he agreed to pay $198.1 million.[23] “This is a significant step towards resolving Mr. Wyly’s disputes with the government and allowing him to exit from bankruptcy,” said Jim Lee, a lawyer at Vinson & Elkins.[13]

The following year, Wyly sold his home in Highland Park, Texas.[24]

Internal Revenue Service

In April 2015, the Internal Revenue Service filed claims amounting to $3.2 billion for income taxes, interest and penalties against Wyly and the estate of his late brother. His lawyer called the IRS claims "unfair and absurd."[35] The largest tax claim ever imposed against an individual. Wyly jokes that this was an IRS "billing error." "They sent us Exxon's tax bill by mistake. Exxon's headquarters is a few miles from my house."

In June 2016, the Court ordered Wyly to pay $1.1 billion in taxes, interest and penalties.[25][26] The IRS moved to collect from the offshore trusts that had been set up by Wyly.[27]

Wyly said he received advice that the Isle of Man was a good place for asset protection — a place good for deferring taxes, not avoiding taxes. He had relied on the advice of their lawyers and accountants regarding the legality of the offshore trusts.[22]

Wyly is convinced that the net result of all this Federal government activity has been to waste the assets of America’s citizens with less money going to taxes and charities and more to lawyers for the government and those needed by Wyly for defense.

Personal

Wyly and his brother Charles, older by a year, were close all their life. They played high school football, attended Louisiana Tech University, and joined Pi Kappa Alpha Fraternity together. They worked together in a large number of businesses they've owned or run.[28][29] In August 2011, just after they had their usual Sunday morning breakfast after church, Charles was killed in a car accident in Aspen's Roaring Fork Valley.

From 1960 to 1976, Wyly was married to Rosemary Acton. In 1969 while at home with her children, Rosemary wrestled a gun away from an intruder. In 1978 in Dallas, he married Victoria L. Steele.[40] Wyly and his wife,[3] Cheryl were married from 1994 to 2016.Cheryl was a former Texas All-State volleyball player at Farmers Branch High School and Valedictorian of Texas A&M's School of Architecture. When Wyly introduced Cheryl to President Bush 41 in 1992, Bush said, "These Wyly brothers have backed me in every race I ever ran—and they never asked for anything.[1]

Wyly has six adult children.[3][4][30] Evan, twins Laurie and Lisa, Kelly, Andrew and Christiana—all six walked to first grade at Armstrong School in Highland Park . They have a tradition of holding family meetings every other month and an annual summer retreat. Wyly has 25 descendants and 37 family members, and his late brother has 14 family members.

References

  1. 1 2 3 4 5 Wyly, Sam (September 2008). 1,000 Dollars and an Idea: Entrepreneur to Billionaire. Newmarket. p. 256. ISBN 978-1-55704-803-5.
  2. 1 2 Rigoni, Gene. "Sam Wyly 'Innovates To Opportunity' Time And Time Again", Monroe Street Journal, Stephen M. Ross School of Business, University of Michigan, January 13, 1997
  3. 1 2 3 4 "The 400 Richest Americans: #354, Samuel Wyly", Forbes magazine, September 21, 2006
  4. 1 2 3 4 "Sam Wyly, Chairman, Sterling Software Inc. and Michaels Stores, Inc." Archived 2007-09-27 at the Wayback Machine., Horatio Alger Association of Distinguished Americans, retrieved September 21, 2007
  5. ↑ "TECHNOLOGICAL INNOVATION AND MONOPOLIZATION".
  6. ↑ Curtis Wackerle, "Explore building under contract to Wyly family", Aspen Daily News, January 29, 2007
  7. ↑ https://www.wsj.com/articles/SB123051274461238545
  8. ↑ http://www.writers.net/writers/books/40761
  9. ↑ Rick Carroll, "End of an era: Explore sells for $4.6 million", Aspen Times, March 6, 2007
  10. ↑ http://www.charlesandsamwyly.com/wyly-dmn-billionaire-brothers.htm
  11. ↑ Barry Meier, "The View From GreenMountain; Financier Mixes Business, the Environment and Politics", New York Times, March 16, 2000
  12. 1 2 Brendan M. Case, Selling secret accounts draws scrutiny: Senate report blasts Dallas firm for offshore services for the masses", Dallas Morning News, August 13, 2006
  13. 1 2 Newsham, Jack (7 April 2017). "SEC Closes The Book On Sam Wyly Case With $198M Paid" (PDF). www.law360.com.
  14. ↑ SEC Charges Corporate Insider Brothers With Fraud, SEC, July 29, 2010
  15. ↑ "Wyly Brothers Charged with Fraud", New York Times, July 29, 2010
  16. ↑ SEC charges billionaire Texas brothers who donate to GOP with fraud, Zachary A. Goldfarb and Philip Rucker, Washington Post, July 30, 2010
  17. 1 2 Ax, Joseph (11 July 2014). "Texas tycoon Wyly found not liable for insider trading". reuters.com.
  18. ↑ Matthews, Christopher M. (May 13, 2014). "SEC Wins Tax-Fraud Case Against Wyly Brothers". The Wall Street Journal. p. C1.
  19. ↑ "Chapter 11 Voluntary Petition" (PDF). PacerMonitor. PacerMonitor. Retrieved 21 October 2015.
  20. ↑ Nate Raymond and Joseph Ax (October 20, 2014). "Texas investor Sam Wyly files for bankruptcy after losing SEC fraud case". Reuters. Retrieved December 26, 2014.
  21. ↑ Erik Larson (Oct 20, 2014). "Samuel Wyly in Bankruptcy Facing $400 Million Forfeiture". Bloomberg. Retrieved December 26, 2014.
  22. 1 2 Curriden, Mark (January 2016). "Wyly wanted IRS to 'put up or shut up'". dallasnews.com.
  23. ↑ Larsen, Erik (October 3, 2016). "Former Dallas billionaire Sam Wyly works out $198.1M deal to resolve legal issues". Dallas News. Bloomberg. Retrieved November 30, 2017.
  24. ↑ Brown, Steve (November 13, 2017). "Bankrupt Dallas billionaire Sam Wyly's Highland Park mansion is sold". Dallas News. Retrieved November 30, 2017.
  25. ↑ Dow Jones Newswires (June 28, 2016). "Sam Wyly Gets a $1.1 Billion Tax Bill". www.nasdaq.com. Retrieved June 29, 2016.
  26. ↑ Joseph Ax and Nate Raymond, Reuters (November 7, 2014). "SEC Wants Texas Businessman Sam Wyly To Pay $255 Million More For Involvement In Fraud Scheme". Business Insider. Retrieved December 26, 2014.
  27. ↑ Lee, David (March 9, 2017). "Ex-Billionaire's Kids Try to Hang Onto Trust". Courthouse New s. Retrieved November 30, 2017.
  28. ↑ Katie Fairbank and Sudeep Reddy, "Billionaire brothers under a microscope: They're known for gifts to charities, politics, but tax shelters scrutinized", Dallas Morning Times, August 27, 2006
  29. ↑ Hamilton, Dennis (2011). Beyond Tallulah : how Sam Wyly became America's boldest big-time entrepreneur. New York: Melcher Media. ISBN 978-1-59591-069-1. OCLC 744978245.
  30. ↑ "Man With his Back to the Wall: With his Once-proud Empire Crumbling Around him, UCC's Sam Wyly is Still Hanging on"f, Forbes magazine, June 1, 1973, accessed September 22, 2007
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