MANHATTAN (CN) – Arkansas class-action attorney Steven Eugene Cauley pleaded guilty Monday to federal charges of stealing more than $9 million of clients’ money. Cauley was named one of the “Top 40 Lawyers under 40” by The National Law Journal in 2005. “I always made a good deal of money in my law practice and knowing that I had additional money coming in, I took a short cut,” Cauley told Judge Paul A. Crotty after he entered his plea.
Cauley, 41, made his career in securities fraud class-action litigation. His Little Rock law firm Cauley Bowman Carney & Williams was co-lead counsel in a class-action that claimed insurance-services firm BISYS Group, now a unit of Citigroup, misled investors about its financial condition. BISYS settled the case for $65.8 million.
Between December 2008 and February 2009, Cauley wired $36.7 million to the settlement administrator to be distributed to class members. Attorney’s fees came to $19.7 million, leaving $9.3 million unaccounted for.
When questioned by a former partner about the missing money, Cauley said it had been invested in Treasury bonds that had not yet matured and it would be wired after the bonds were liquidated. The partner contacted U.S. District Judge Jed Rakoff, who presided over the BISYS case, after Cauley failed to do so.
In an April 20 hearing, Cauley invoked his Fifth Amendment right when Judge Rakoff asked where the money was. Cauley reached a plea deal with prosecutors soon after.
Prosecutors said Cauley used the money to finance his firm’s overhead and for various business ventures he was involved in, and for his own personal investments.
Cauley, a graduate of Vanderbilt University Law School, said in his petition that he was suffering from “issues of depression” when he took the settlement money.
He pleaded guilty to wire fraud and criminal contempt and remains free on $5 million bond. Cauley faces a maximum of 10 years in prison and fines of up to $125,000. He agreed to forfeit $9.3 million.
He surrendered his law license to the Arkansas Supreme Court last week.
Cauley served as co-counsel on several major securities cases that netted more than $200 million in settlements.
Early in his career, Cauley assisted in the Nasdaq market-makers antitrust case that concluded with a landmark settlement exceeding $1 billion.