(Bloomberg) — Texas businessman Charles Wyly had “no significant life insurance” when he died in a 2011 car crash, leaving his widow insolvent and dependent on family in the midst of a U.S. regulator’s fraud lawsuit against her husband’s estate, bankruptcy records show.
Caroline “Dee” Wyly, 81, exhausted the liquid assets in the estate and can no longer tap the remaining funds to pay for living expenses or litigation, her lawyer said in a filing two days ago in U.S. Bankruptcy Court in Dallas.
The investor’s widow, known in Texas for her philanthropy in education and performing arts, filed a Chapter 11 petition on Oct. 23, citing financial fallout from the Securities and Exchange Commission case against her husband in Manhattan. She isn’t accused of wrongdoing.
“Dee’s income following the death of Charles, while substantial, was completely inadequate to pay the costs of maintaining the assets she now was responsible for,” her lawyer said in the filing. “Dee has managed to continue to pay her expenses only through the kindness of family.”
Caroline Wyly has said she owes at least $101.2 million to the SEC, which in May won a trial against her late husband and billionaire brother-in-law Samuel Wyly. A federal jury in Manhattan found the brothers, who developed companies including the arts and crafts retailer Michaels Stores Inc., hid stock offshore and made illegal trades for 13 years, making $550 million in illegal profit.
Caroline Wyly’s home in Dallas is mortgage-free, and a family residence in Colorado has “significant equity” that can’t be tapped as a result of the SEC litigation, according to the filing. Her family members have loaned or given their assets to her to help her get by, according to the filing.
She said she plans to use the Chapter 11 process to secure a global settlement with the SEC and the Internal Revenue Service, which seeks back taxes from the trades. Caroline Wyly intends to sell her Colorado home if the bankruptcy judge approves, according to the filing.
Details of her finances were included in court filings requesting expedited consideration of several standard requests in Chapter 11, including permission to administer her estate. A judge must approve expenditures after a debtor files a bankruptcy petition. Samuel Wyly filed for bankruptcy in the same court on Oct. 19, citing a need to preserve assets as he and his brother’s estate face a disgorgement order of almost $300 million. SEC lawyers plan to argue at a hearing in New York next month for that amount to be more than doubled.