Posted Jun 01, 2009 09:45 pm CDT
In an extraordinary April 20 hearing transcript documenting the beginning of the end of Gene Cauley’s enviable story of professional success, a federal judge calls for an investigation of the high-flying Arkansas plaintiffs security lawyer and chastises co-counsel for not keeping closer track of his activities.
Now the 41-year-old Cauley has admitted that he misappropriated $9.3 million in client settlement funds as part of his guilty plea today to wire fraud and criminal contempt, according to the Wall Street Journal.
Cauley reportedly said that he used the money to pay overhead and make business investments. As part of the plea agreement, he has pledged to repay it.
“I always made a good deal of money in my law practice,” Cauley told the judge today, according to Bloomberg. “When I had some extra money coming in, I took a shortcut.”
He petitioned the Arkansas Supreme Court on May 14 to surrender his law license, admitting that he had misused $9.3 million of a $66.5 settlement he held in escrow concerning class-action litigation against the BYSIS Group Inc. insurance-services firm in Roseland, N.J. And, he stated in the petition, “I made false statements to others to explain my failure to pay over these funds, which I had used for other and unauthorized purposes,” the news agency reports.
Seemingly set for life after he persuaded one of the top national practitioners in his field, Bill Lerach, to joint-venture cases with him, Cauley meanwhile was suffering from depression, reports the Wall Street Journal Law Blog in the first of a series of articles on Cauley’s background.
And, as Cauley began buying commercial real estate and established a community bank, a chain of car washes and an oil and gas exploration company, he apparently bit off more than he could chew.
“My life has been characterized by parabolic advances followed by declines,” the 1993 graduate of Vanderbilt University Law School tells the WSJ blog. Still in his 30s, he realized he had made the big time in 2000, when he earned $4 million and thought to himself: “I have just paid more in taxes than anyone in my family has made in all of their life.”
When Cauley is sentenced in September in the Manhattan federal court case, sentencing guidelines call for a prison term of 78 to 97 months. However, the judge could deviate from that recommendation.
ABAJournal.com: “Ark. Lawyer in Hot Water Over $9M Settlement-Funds Shortfall”
ABAJournal.com: “Ark. Lawyer Expected to Plead Guilty in Alleged $9M Escrow Shortfall”
Updated at 6:55 p.m. to include information from Bloomberg article.