By Patrick Fitzgerald

Texas businessman Samuel E. Wyly agreed to a settlement with the Securities and Exchange Commission, bringing to a close a yearslong cat-and-mouse legal battle over hundreds of millions in assets the securities regulator claimed the former billionaire had illegally stashed in offshore accounts.

In papers filed Friday in U.S. District Court in New York, Mr. Wyly agreed to pay the regulator $198.1 million. A federal judge last year fined Mr. Wyly that amount after a jury convicted him of securities fraud in 2014.

In return, the SEC will drop its efforts to claw back the more than $500 million it claimed Mr. Wyly had directed to offshore trusts in the Isle of Man. The SEC will also "provide cooperation" and take steps "to ensure" Mr. Wyly will receive a tax credit against his federal income tax liabilities of about $181 million, according to court papers.

The settlement requires approval from SEC commissioners and a federal bankruptcy judge in Dallas, where Mr. Wyly and his brother's widow each filed for bankruptcy protection in 2014.

Representatives for the SEC and the Wylys couldn't be reached for comment.

The SEC sued the Wyly brothers in 2010, accusing them of using a web of trusts and other entities based in the Isle of Man and Cayman Islands to sell large portions of shareholdings in four companies but not disclosing those sales in filings with regulators over a 13-year period starting in 1992. Charles Wyly died in a 2011 car accident.

Lawyers for the Wylys contended the web of trusts were set up for appropriate tax and estate-planning purposes, and weren't under the family's control. The lawyers denied wrongdoing by the Wylys.

Earlier this year, a bankruptcy judge found the Wyly brothers committed tax fraud by shielding more than $1 billion in family wealth in offshore trusts.

Sam and Dee Wyly had sought bankruptcy protection in 2014 in a bid to deal with the damages award for federal securities law violations involving the trusts.

In May, a bankruptcy judge ruled Dee Wyly, who was married to Charles for 56 years, didn't commit fraud and had no reason to know the offshore money that was paying for lavish homes, artwork and jewelry had been improperly hidden from U.S. tax authorities.

Not so for Mr. Wyly, 81 years old, who, with the help of his brother and a team of lawyers, created a complex network of offshore accounts to conceal trading profits and "amass tremendous untaxed wealth," according to the judge's ruling.

Mr. Wyly and his family members are in talks with the Justice Department, the Internal Revenue Service and bankruptcy creditors over the terms of a so-called global settlement that would include resolution of a tax bill of more than $1 billion, according to the court papers filed Friday.

The Wyly brothers built their fortune by founding or acquiring several companies, including business-software makers Sterling Software Inc. and Sterling Commerce Inc., arts-and-crafts chain Michaels Stores Inc. and insurer Scottish Re Group Ltd. Sterling Software was later sold to CA Technologies Inc. and Sterling Commerce to AT&T Inc., which later sold it to International Business Machines Corp. Michaels was sold to private-equity firms Blackstone Group and Bain Capital and went public in 2014. Cerberus and MassMutual later took over Scottish Re.

Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com

(END) Dow Jones Newswires

October 01, 2016 16:52 ET (20:52 GMT)

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