Michaels Stores Gets Grand Jury Subpoena

New York prosecutors want information from Michaels Stores (MIK Quote) about shares held in trusts that may be tied to the family of Chairman Charles Wyly.

After the close of trading Wednesday, Michaels disclosed it has received a grand jury subpoena from Manhattan District Attorney Robert Morgenthau for "documents and records" concerning securities held directly or indirectly in several non-U.S. trusts.

The Securities and Exchange Commission is also investigating, Michaels said in a postclose press release.

The nation's biggest retail chain of arts and crafts supplies said some of the trusts had acquired shares and options "in transactions directly or indirectly" with Charles Wyly and his brother, Vice Chairman Sam Wyly. Some of the securities in question also were acquired through a 1999 private placement with the company.

"The Company understands that Charles and Sam Wyly and certain of their family members are direct or contingent beneficiaries of irrevocable non-U.S. trusts," the company said. "Based on information available to the Company, the Company's SEC filings have not reported those securities as beneficially owned by Charles and Sam Wyly."

The company said the information about the number of shares held in the trusts has been provided by the Wyly family.

Outside of his role with Michaels, Sam Wyly has sometimes worn the hat of a shareholder activist. Three years ago, he mounted an unsuccessful proxy contest against Computer Associates (CA Quote), seeking to force the company to refund more than $1 billion in executive bonuses.

The Dallas billionaire has been a long supporter and financial backer of President Bush.

In a 1996 regulatory filing about the private placement, the company said it sold 2 million shares at $12.50 apiece to "entities owned by independent trusts of which family members of Sam Wyly and Charles J. Wyly, Jr. are beneficiaries." The sales took place in three seperate transactions.

In the same filing, Michaels discussed how the trusts exercised a series of options to purchase shares that "provided the Company with $20 million of additional capital in 1997."

Late Wednesday, Michaels fell 40 cents to $31.35.