Legal News

Say it Ain?t So, Geno! Cauley to Plead Guilty, Give up Law License

By Ashby Jones

High-profile Arkansas plaintiffs lawyer Gene Cauley has agreed to plead guilty to one count each of wire fraud and criminal contempt for “failing to safely hold” $9.3 million in settlement money he was overseeing for clients. The wire fraud charge carries a maximum ten-year prison sentence.

The news was divulged as part of an Arkansas Supreme Court filing Cauley made on May 9, which stated he was giving up his law license. Click here for that filing; here for a blog post from earlier this month on the situation; here for a brief story from the Arkansas Times.

Here's the background. Cauley was one of the lead plaintiffs' lawyers in a 2004 securities suit that alleged that the BISYS Group, an insurance company, inflated its stock value by issuing false and misleading press releases and financial filings. The company has denied wrongdoing, but it settled the case in 2006 for $65.8 million.

According to a transcript of an April 20 hearing before New York federal judge Jed Rakoff, Cauley was the sole signatory of an account created to hold the BISYS settlement money. The attorney, according to the transcript, informed his co-counsel last month that he could not produce about $9.3 million in settlement funds that was supposed to be distributed to the plaintiffs in April.

Shortly after that hearing, Cauley sat down with federal prosecutors and hammered out a deal, according to the Arkansas Supreme Court filing. In that filing, Cauley confessed:

In federal litigation in New Your known as BISYS Securities, after a large settlement, I was responsible for holding the multi-milion dollar settlement funds as a fiduciary and escrow agent for the plaintiffs. I failed to safely hold the last approximately $9.3 million of those funds and pay the over when required to do so. I made false statements to others to explain my failure to pay over these funds, which I had used for other and unauthorized purposes.

Elaborated Cauley:

I now understand I have been faced with issues of depression and am seeking appropriate help for them. I do not offer this situation as any form of defense for my actions detailed here. I accept full responsibility for my actions shown in these exhibits.

Cauley’s lawyer, John Wesley Hall, says his client has signed and delivered his plea to federal prosecutors and is due to file the plea in court June. The missing settlement money, Hall says, “could be in all kids of things,” such as real estate and business ventures. Hall says he has recovered half a million of the missing money and will attempt to recover the remainder.

In 2005, the NLJ named Cauley one of the "Top 40 Lawyers under 40," noting that he had scored a $41 million securities settlement with NewPower Holdings in 2004 and an earlier $115 million settlement in a shareholder fraud case against Lernout & Hauspie Speech Products. Earlier in his career, NLJ reported, Cauley assisted "in the Nasdaq market-makers antitrust case . . . that concluded with a landmark settlement exceeding $1 billion."

Sigh. Cauley was once featured as a LB Lawyer of the Day.

Full post as published by Law Blog - WSJ.com on May 18, 2009 (boomark / email).