It looks like the federal government is inching closer to foreclosing on property tied to the disgraced Little Rock attorney S. Gene Cauley, who died in 2016 at the age of 48.
Back in May we told you that the federal government wanted to foreclose on a Hot Springs property to help cover Cauley’s $3.7 million tax bill.
The feds filed a lawsuit against the estate of S. Gene Cauley in U.S. District Court in Hot Springs and needed someone to be named as a special administrator of the estate to be served with the paperwork.
The federal government wanted to have Cauley’s heirs named as a special administrator, but they opposed it in court filings. Instead, the heirs were open to the idea of a qualified individual being named.
Last month, James F. Dowden, a Little Rock attorney, was appointed to be the special administrator. He was served with the lawsuit on Oct. 13.
If you recall, the feds alleged in the suit that Cauley fraudulently transferred title to his Lake Hamilton house to a trust he created and controlled in 2009. 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, Cauley knew he was facing millions of dollars in potential civil and criminal liability for taking client funds.
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 IRS said it sent notices to Cauley, but he never paid, and the bill stood at $3.7 million as of March 1. It continues to accrue interest.
Cauley died in the house in August 2016, months after completing his federal prison sentence. His death was ruled a suicide.