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Weekly UpdatesFEDERAL SUBPOENAS FROM a criminal investigation in New York have followed former Little Rock lawyer Gene Cauley back to Arkansas. Prosecutors are scrutinizing his real estate investments in connection with Cauley's theft of $9.3 million in client funds.
Cauley recently waived indictment in U.S. District Court in Manhattan, pleading guilty to wire fraud for spending the money for his personal expenses and business ventures and criminal contempt of court for lying about it.
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Cauley surrendered his passport and has until June 8 to post $5 million bail, secured by $3 million in real estate and $2 million secured by three financially responsible people. Sentencing is scheduled for Sept. 10.
Investigators from the U.S. Attorney's Office in New York are interested in Cauley's real estate holdings beyond his ability to post bond. They are gathering subpoenaed real estate records to untangle Cauley's web of limited liability companies and examine his assets with an eye toward restitution and more.
What they discover will help answer questions about liquidating assets to repay clients and whether client funds were used in connection with his properties. In securing the bond, Cauley is to use only property "not tainted by the defendant's use of misappropriated client funds."
If the examination goes deep enough, it could also fix a net value on Cauley's leveraged multimillion-dollar portfolio.
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Kevin Huchingson, principal at the Little Rock office of Colliers International, is listing several Cauley-owned properties for sale. Primarily undeveloped commercial sites in west Little Rock, the properties were on the market months before Cauley's legal problems became public knowledge on May 8.
Among the properties are a 1.8-acre site at the southeast corner of Col. Glenn and Shackleford roads, about 4 acres at the northeast corner of Stagecoach and Baseline roads and a 1.6-acre site near the northeast corner of Stagecoach and Otter Creek roads.
Huchingson is aware of the rumored "Cauley list," a detailed roster of real estate holdings marked for sale. He has had more than a few inquiries about it from commercial realtors and prospective buyers.
"I have no list, but I have had people calling me up and ask about it," Huchingson said. "We don't have any new property on the market."
Real estate watchers anticipate a sell-off of Cauley's stakes in various properties. His defense lawyer, John Wesley Hall Jr., told the Arkansas Supreme Court in a May 9 e-mail that "Cauley is liquidating assets to make restitution" and that he "plans on doing so even if he has to sell assets at a loss."
But for now, not much has shown up in the way of public filings.
Cauley remains an investor in Vertical Lofts, a green residential development in downtown Little Rock.
"There's no change [in ownership], and I don't have any comment," said Matt Bell, an investor in the project.
Eleven of 23 planned single-family attached units are completed. Six have sold and a couple more sales are pending.
Vertical Lofts is shooting for certification as a platinum LEED (Leadership in Energy & Environmental Design) project, which would make it the only residential development with this level of designation in Arkansas.
Engaged in Transactions
However, during the past 90 days, Cauley's name has cropped up in several real estate transactions in Little Rock.
Mid-May saw him signing on deals that included the names of two other founding investors in Little Rock's Centennial Bancshares Inc., Steve Wortman and Rick Ferguson.
Cauley, Wortman and Ferguson were the three biggest stockholders in Centennial, owning a combined 78 percent when it was sold in 2008 to Conway's Home BancShares Inc.
Most of the real estate filings were tied to property securing two $4.5 million funding agreements with Centennial Bank of Conway (formerly Home BancShares' First State Bank).
The two mortgages appear to split largely along the lines of property associated with Cauley and property controlled by Wortman, president of Little Rock's Kaufman Lumber Co. Wortman couldn't be reached for comment.
Arkansas Business agreed late last year to Cauley's demand that reporters not attempt to contact him. Ferguson, a Little Rock builder of upscale homes, shed little light on the May 5 shuffling of real estate documents when contacted. His name appears only among the paperwork in connection with LRG Investments LLC.
LRG Investments and Cauley's Center 3 Investments LLC own a 2-acre undeveloped office site on Executive Center Drive in west Little Rock used to help secure a $4.5 million mortgage.
Mixed in with the mortgage filings is a reported $2.1 million sale of a 6,500-SF home in west Little Rock's Chenal Downs neighborhood. Steve Wortman and his wife, Melissa, sold the house to Generic MSI Properties LLC.
Cauley signed on behalf of Generic MSI when the house was rolled in to help secure a separate $4.5 million loan. Under the Wortmans' ownership, the home secured a stand-alone $1.1 million mortgage.
The residence is an enigmatic investment. Although it carries a recent paper value of $2.1 million, the property was listed for sale at less than $1.6 million in early March.
Those familiar with the house consider it a flip investment that flopped. Originally listed for sale for 503 days, the house remains unsold after another 410 days on the market.
The Wortmans, who live in the Valley Falls Estates neighborhood that Ferguson developed, took ownership of the house in a transaction valued at $2 million on July 13, 2006. The seller was Ferguson's Waterview Estates LLC.
The property was listed for $1.95 million on Aug. 17, 2006. Nearly a year later, on June 26, 2007, the asking price was reduced to $1.7 million.
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The property was taken off the market on Jan. 2, 2008. It was once again listed for sale on Jan. 25, 2008. That $1.59 million listing expired on March 2, 2009.
The Chenal Downs home is one of three properties that changed hands in connection with the two $4.5 million mortgages.
Ownership of a 14.3-acre commercial tract in west Little Rock was split out, with 2.5 acres going to Wortman's MSI Holding in a transaction valued at $333,000 and 11.7 acres going to Cauley's Generic MSI in a transaction valued at $200,000.
Little if any money changed hands in the shifting of property. And no money was involved in two other Cauley deals that transferred ownership of west Little Rock houses through deeds dated Dec. 15 but not filed until March 26.
His 4,687-SF home in the gated Valley Falls neighborhood, bought 11 months ago for a reported $1.1 million, is now held in the name of the S. Gene Cauley Irrevocable Trust.
Title to a 1,400-SF home in the Sandpiper Creek neighborhood, acquired nine years ago for $129,000, is now in the name of Carolyn Cauley, his mother.
More Cauley-relatedrealestatetransactions are expected to roll out during the coming weeks.
A Glimps at Cauley's Real Estate activity
Gene Cauley has indicated that cash-flow problems in 2007 led him to pilfer client trust funds. Here's a sampling of Cauley's real estate activity in Little Rock during an 18-month window.
June 2007
* 7400 Scott Hamilton LLC, led by Cauley, acquires the 129-acre former Lucent Technologies development for $5.8 million. Parts of the property are later split out to several other limited liability companies. July and August 2007
* Vertical Development LLC, led by Cauley and Matt Bell, assembles property for the Vertical Lofts project in downtown Little Rock in deals totaling $644,000. The development is financed with a two-year loan of $6 million from Simmons First National Bank of Pine Bluff.
December 2007
* 65th Street Land Co. LLC, led by Cauley, donates about 12 acres near the southwest corner of 65th Street and Scott Hamilton Drive to Arkansas Foodbank Network Inc.
The deal is valued at $1.04 million. The limited liability company owns about 41 acres of the former Lucent Technologies development. February 2008
* Cauley acquires sole ownership of 3700 West 65th LLC, which owns its namesake 10-acre industrial project in south Little Rock. He swaps a 2.9-acre commercial site near the northeast corner of Chenal Parkway and Kirk Road in west Little Rock. The trade is valued at $2 million.
May 2008
* 1-30 Land Co. LLC, led by Cauley and Rick Ferguson, secures a one-year loan of $5 million from Pulaski Bank & Trust of Little Rock. The limited liability company owns about 40 acres of the Lucent project.
* 7400 Scott Hamilton LLC, led by Cauley, secures a five-year loan of $5 million from Centennial Bank. The limited liability company owns about 23 acres of the Lucent project.
June 2008
* Pavilion in the Park LLC, led by Cauley, sells the Catering to You project at 8121 Cantrell Road for $375,000.
The half-acre property was bought as part of a $6 million deal for the Pavilion In the Park development in July 2003.
* Cauley also picks up a 20-year loan of $4.5 million from Riversource Life Insurance Co. of Minneapolis secured by the 82,000-SF mixed office/retail project.
July 2008
* Cauley buys a 4,687-SF home in west Little Rock's Valley Falls Estates neighborhood for $1.1 million from VFE LLC, led by Rick Ferguson. The deal is funded with a three-year loan of $843,750 from First Security Bank of Searcy.
August 2008
* The 3700 W. 65th St. industrial property is refinanced with a 17-year loan of $2.1 million from American Equity Investment Life Insurance Co. of Des Moines, Iowa. Cauley bought the 10-acre development in southwest Little Rock for $2.4 million in April 2005.
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