The Top 10 Business Stories of 2009

by Arkansas Business Staff  on Monday, Dec. 28, 2009 12:00 am  

But the first signs of trouble occurred earlier this year when Affiliated's primary bank, U.S. Bank, temporarily cut off funding. The bank wouldn't honor anymore of Affiliated's credit requests because it was overdrawn by $11 million.

Founded in 1948, Affiliated had been trying to sell off its corporate-owned stores, including Harvest Foods and Piggly Wiggly locations, but the credit  crunch during the recession stalled the sales.

Affiliated is owned by its 190 members, and any profits were returned annually to them. Many owners chose to convert their profits into "certificates of indebtedness" with Affiliated, which typically paid higher interest rates than banks.

Some investors said they didn't realize the company was facing financial trouble until they learned about the bankruptcy filing. By that time, though, it was too late and their investments were frozen.

Investors have sued former President John Mills of Cabot and corporate secretary Charles Moore of Howard County in an attempt to recover their losses. An attorney for the plaintiffs estimated that more than 100 investors had lost more than $30 million from Affiliated.

In their lawsuit, investors accused Mills and Moore of selling unregistered securities. Moore denied the allegations, but Mills took the unusual step in a civil case of invoking his Fifth Amendment right against self-incrimination.

No. 8
Days of Reckoning

Former Little Rock lawyer Gene Cauley will begin serving an 86-month sentence in federal prison on Jan. 25, just nine months after his theft of more than $9 million from a client trust account was discovered.

Cauley suffered the fastest and most spectacular downfall this year, but he was certainly not the only Arkansan to face a day of reckoning for white-collar crime in 2009.

Cauley, who built a national reputation as a plaintiffs' lawyer in securities cases while still in his 30s, informed his former law partners in April that the final $9.3 million he was supposed to pay clients out of a $65 million settlement account was "not available." The former partners informed the New York federal judge who had entrusted Cauley with the settlement funds, and on June 1 Cauley pleaded guilty to wire fraud and criminal contempt of court.

Despite a financial statement indicating a nine-digit net worth at the beginning of the year, he was only able to come up with $500,000 of the missing money before he was sentenced in November. In the meantime, other claims to whatever was left of his fortune kept cropping up - including bank loans, a repossessed Gulfstream jet, tax delinquencies and, tragically, a $3 million judgment to the family of a 22-year-old man who was electrocuted while working for Cauley's billboard company. Complicating his financial workout plan was his former law partners' claim that they couldn't pay him contingency fees on pending cases because he had surrendered his law license in May.

Also in 2009:

 

 

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