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The only other lawmaker to return any donations from the Wylys is Sen. John Cornyn (R-Texas), who returned two $3,800 donations from Charles Jr. and Dee Wyly in February 2005.
McCain’s decision to return the Wyly donations is a sign that he is taking his image as a campaign reformer seriously, not wanting to have even the appearance of impropriety for taking donations from businessmen accused of sheltering $100 million in taxes on the Isle of Man.
At the same time, the snafu carries some embarrassment for the Senator, since the Wyly investigation has been widely known for almost a year. A front-page story on Sam and Charles Wyly Jr. appeared last June in The Wall Street Journal, complete with quotes from the IRS Commissioner Mark Everson accusing executives such as the Wylys of acting “at the expense of shareholders.”
McCain’s flirtation with his former rival’s fundraising network has attracted intense interest. One liberal group, the Senate Majority Project, cited the Wyly donations on April 24 as “Tax Evaders for John McCain.”
In the weeks leading up to the May 15 event, numerous publications touted the Wyly presence as a sign of momentum building for McCain. In late March, Sam Wyly and his wife, Cheryl, gave $5,000 each, the maximum, to Straight Talk.
Then, on April 28, Charles and Charles Wyly III gave $5,000 each to McCain’s PAC.
At that point, the McCain political operation finally ran a background check on the Wylys and discovered the investigations by the IRS as well as the Securities and Exchange Commission and the Manhattan District Attorney’s office.
“We vetted the checks that day [April 28]. When we vetted Charles, that’s when we realized they were under investigation,” Goldman said.
The next day — more than a month after Sam Wyly’s donations — all four Wylys were sent $5,000 checks to refund their contributions.
According to the Journal, the Wylys — described as software and retail entrepreneurs — set up trusts on the Isle of Man, a small island between Ireland and England with loose tax and regulatory laws. The money earned from certain stock-option transactions — more than $100 million from the Wylys over a decade —were donated into these trusts, as well as dozens of other unnamed corporate executives. The IRS believes this has led these executives to fail to report income and dodged more than $700 million in taxes.
The Wyly brothers contend these are honest, legal trusts set up for their family members and charity.