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A federal judge has ordered Texas entrepreneur Sam Wyly to pay $1.1 billion in taxes and penalties for committing tax fraud using offshore accounts, even though the former billionaire's net worth has fallen to a fraction of that amount.

The payment demand from Judge Barbara Houser on Monday was made for federal taxes due as far back as 1992. In a court opinion filed last month, she admitted that the money "may now be more difficult for the government to collect given the passage of time and the dissipation of Sam's wealth."

Financial statements filed with the U.S. Bankruptcy Court in Dallas in November 2014 declared that Mr. Wyly's assets were worth $382.83 million. His spokesman didn't return requests for comment on the order.

In a May 10 opinion, Judge Houser ruled that Mr. Wyly, 81 years old, and his lawyers created a complex network of offshore accounts to conceal trading profits and "amass tremendous untaxed wealth."

Specifically, Judge Houser said Mr. Wyly transferred stock options he earned, as compensation for serving as a director of business for software maker Sterling Software Inc. and arts-and-crafts chain Michaels Stores Inc., into the offshore trusts in exchange for a private annuity.

The network enabled Mr. Wyly to "escape his obligation to pay tax on the annuity income he was contractually entitled to receive," wrote Judge Houser, who called the offshore system "nothing short of mind-numbing…with identically named domestic and foreign corporations, and layers upon layers of foreign entities."

Mr. Wyly's lawyers, during a three-week trial, blamed his hired financial professionals. Mr. Wyly testified that he hasn't prepared his own tax returns since the 1960s.

Judge Houser was not convinced.

"To accept [his] explanation requires the court to be satisfied that it is appropriate for extraordinarily wealthy individuals to hire middlemen to do their bidding in order to insulate themselves from wrongdoing so that, when the fraud is ultimately exposed, they have plausible deniability," she wrote.

Judge Houser also found that Mr. Wyly's brother Charles, who died in a 2011 car accident, was also part of the "deceptive and fraudulent" scheme.

In her 459-page opinion, Judge Houser traced Mr. Wyly's transfer strategy to a 1991 asset protection and tax deferral seminar held in New Orleans by trust promoter David Tedder, who later visited the Wylys at Sam Wyly's Malibu, Calif., home.

The Wyly family used offshore money to buy art and jewelry and to build homes in Texas and Colorado in a way that Mr. Wyly "believed prevented them from being taxed as gifts or other distributions from offshore," the opinion said.

U.S. Securities and Exchange regulators later sued Mr. Wyly for securities fraud, a dispute that led to a $198.1 million judgment. He filed for chapter 11 protection in October 2014, saying he couldn't afford such a steep penalty.

The payment breakdown in Monday's court order shows that roughly $745 million is owed for penalties. Judge Houser ordered him to pay about $135 million for federal taxes due from 1992 to 2013 and about $227.1 million in interest.

In her opinion, Judge Houser pointed out that the tax bill sharply escalated after Mr. Wyly, who learned of the Internal Revenue Service's audit in early 2004, opted not to cooperate with tax investigators. She added that Mr. Wyly was "uncooperative" during the trial and "had to be impeached frequently to get him to admit to fairly obvious facts."

He "simply waited for the IRS to come after him, all the while continuing his offshore activities," she wrote. "Such a cavalier attitude toward his reporting obligations for 20-plus years reflects, at a minimum, reckless indifference."

Peg Brickley contributed to this article.

Write to Katy Stech at katy.stech@wsj.com<mailto:katy.stech@wsj.com>

(END) Dow Jones Newswires

June 28, 2016 16:25 ET (20:25 GMT)

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