Legal News

The Cauley Conversation, Part 2: After The Fall

By Nathan Koppel

We offer now the second installment of our interview with Gene Cauley, the Arkansas lawyer who pleaded guilty yesterday to two felonies for misusing clients' settlement money. Click here for Part I.

The case at issue which got Cauley in trouble was a securities class action against Bisys Group that Cauley and his plaintiffs co-counsel settled in 2006 for $65.8 million.

The plaintiffs’ lawyers in Bisys, Cauley says, earned about $20 million. Cauley was the sole signatory of an account created to hold the clients' portion of settlement, about $45 million. He says he distributed $36 million of that amount to his clients.

But problems cropped up in 2007. Cauley says he ran into cash-flow problems with some of his business ventures. (He has a number of business interests, including car washes, real estate, and an oil & gas firm.) Unable to get a bank loan, Cauley says, he used some of the remaining $9 million in settlement money to pay his business expenses and invested the remainder of the settlement. He says he believed that he would be able to recoup the money in time to pay it to clients in April, when it came due.

Rather than swallowing his pride and admitting he had cash-flow problems, he says, "I took a shortcut."

Asked whether he had ever committed a similar offense in other cases, Cauley says he could not comment. But, he offered, "I have communicated to the U.S. Attorney (in New York) everything I have ever done but pilfering candy bars."

The last few months have been "as bad as you can imagine," says Cauley, who has three children. He says he has come to terms with the fact that he is likely to go to prison. "I've been low before and each time I've come out of it. I'll try to do that in again, likely in another field."

Full post as published by Law Blog - WSJ.com on June 02, 2009 (boomark / email).