Several of the lawyers for the plaintiffs in the Bisys Group securities lawsuit are concerned with the whereabouts of more than $9 million from the $65.8 fund established in connection with the settlement of the case.


As reflected in the transcript of the April 20, 2009 hearing before Southern District of New York Judge Jed Rakoff (here), in response to a question from the court about the missing $9.3 million, counsel for plaintiffs’ attorney Gene Cauley (sole signatory on the settlement fund escrow account) reported that “the funds are presently unavailable to be delivered,” and when asked why, counsel responded by saying that “if I go into anymore detail, I think I might violate a privilege against self-incrimination.”

In response, Judge Rakoff said that “it appears not unlikely… that Mr. Cauley may have committed a crime or several crimes” and that “he may have committed disbarrable conduct in one or many ways.” Judge Rakoff also said that he was drawing the inference from Cauley’s taking the Fifth that “Mr. Cauley has either misappropriated or otherwise misallocated these funds” and that because of that possibility, Rakoff “asked the U.S. Attorney to have someone here today.” There was in fact an AUSA in the courtroom at the hearing, and Rakoff observed that “I trust there will be a prompt investigation of this matter by the U.S. Attorney’s office.”

When the Bisys Group litigation settled in October 2006, Cauley’s former law firm, Cauley Bowman Carney & Williams, was a co-lead counsel in the case and appointed as custodian for the settlement fund. Cauley was designated as sole signatory on the escrow account in which the funds were deposited.

Rakoff had ordered distribution of the settlement funds to the class plaintiffs through a class action settlement administrator, AB Data. The class funds were to be provided to administrator in a series of payments, the last of which, in the amount of $9.3 million, was to have taken place on April 2, 2009. Apparently Cauley advised A.B. Data that the funds for the April 2 installment were invested in a 90-day Treasury bill and that the funds would be available by April 8. However, the $9.3  million is yet to be provided to A.B. Data.

On April 15, several of the lawyers from Cauley’s former firm, now part of a firm called Carney Williams, faxed Rakoff a letter advising him of the situation. Though Rakoff was out of the country at the time, he directed his law clerk to convene a joint conference call, in which Cauley apparently declined to participate. Rakoff then issued an order requiring Cauley’s appearance at the April 20 hearing.

At the April 20 hearing, Rakoff ordered the funds that have been deposited so far with the settlement administrator to be distributed to the plaintiff class.

In a Law Blog post about these remarkable circumstances here, Cauley’s counsel is quoted as stating with respect to the missing $9.3 million that Cauley is “working to be able to find the money and to pay it in 90 days.” The lawyer also said that Cauley “expects to make everyone 100% whole.”

Judge Rakoff closed the April 20 hearing with a brief peroration reflecting on the unusual circumstances in the Bisys Group case: “When I hear people cracking lawyer jokes, I always take umbrage and point out that the profession of Lincoln, the profession of Madison and Jefferson often represents the highest ideals in our society. But recent events give me pause about how true that is.”

Cauley was the subject of a past, somewhat colorful Law Blog post (here), which makes for even more interesting reading in light of these more recent circumstances.

Special thanks to a loyal reader who also forwarded me a copy of the hearing transcript.