Remember the disgraced Little Rock attorney S. Gene Cauley, who died nearly five years ago at the age of 48?
Well, the federal government wants to foreclose on a Hot Springs property to help cover Cauley’s $3.7 million tax bill. It is suing “Jane Doe” in her capacity as the personal representative or special administrator, or both, for the Estate of S. Gene Cauley. Also named as a defendant is Valorie Cripps in her capacity as the Trustee of the S. Gene Cauley Irrevocable Trust. She could not be reached for comment.
Back in 2009, the feds alleged in a lawsuit filed last month, Cauley fraudulently transferred title to his Lake Hamilton house to the trust he created and controlled. That way creditors couldn’t get their hands on the property to cover his debts. He bought the house in 2007 for nearly $700,000.
“At the time of the transfer, Cauley knew he would be facing millions of dollars in potential civil and criminal liability for misappropriating his client funds,” said the suit, filed in U.S. District Court in Hot Springs.
Shortly after transferring the property, Cauley pleaded guilty to misappropriation of $9.3 million of client funds and was sentenced to 86 months in federal prison.
He also was ordered to pay $8.8 million restitution.
While Cauley was serving time, the IRS in 2011 took a closer look at his 2007 federal income tax return. The IRS determined Cauley owed $2.4 million for failing to report the $9.3 million he took from his clients that year as income. The suit said he used the money for his own personal and business expenses.
The IRS said it sent notices to Cauley, but he never paid, and now the bill stands at $3.7 million.
Cauley died in the house in August 2016, months after completing his federal prison sentence. His death was ruled a suicide.
The federal government wants a judge to rule that Cauley’s transfer of the Hot Springs property is invalid and the house should be sold to pay the tax bill.
As of Thursday morning, the defendants hadn’t filed their response.
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