ocean springs — C. Douglas Gulley Jr. was the proverbial “pillar of the community” — the last person investors wouldn’t think to trust.
Gulley, who had offices of C. Douglas Gulley and Associates in Ocean Springs and Pascagoula, was vice president of the Ocean Springs Chamber of Commerce, a former president of the Rotary Club and a trustee for the Walter Anderson Museum of Art.
The Gulleys appeared to be profitable as well, driving luxury automobiles such as a Jaguar, a Rolls Royce and a Mercedes Benz, taking cruises on their 49-foot yacht, flying a private airplane, vacationing at their condominium in the Caymans, collecting special edition motorcycles and investing in a new Fixed Base Operator business at the Stennis International Airport. The couple’s upscale home was on the Mississippi Gulf Coast Pilgrimage Tour in 1997.
Now investors are wondering if it was their life savings that financed the affluent lifestyle of the Gulleys. Gulley has been charged with 21 counts of embezzling money from his clients. Officials said more than $1 million is missing from clients’ accounts. That figure is expected to climb as the audit continues.
Gulley has denied wrongdoing.
Records were seized from the offices of Gulley and Associates in March by the Mississippi Secretary of State’s (SOS) office, which has the responsibility of registering and policing agents who sell securities in Mississippi. Assistant Secretary of State Leslie Scott said numerous irregularities came to light during the SOS’s routine audit of the company’s accounts.
“Four investors were questioned,” Scott said. “We had documentation from the records, and the investors provided a lot of valuable information as well. Between our respective pieces of information, a lot of good investigatory work was done that benefited our office as well as the district attorney’s office.”
Scott said records indicated a very elaborate scheme to defraud and mislead investors that involved generation of records that were misleading and inaccurate.
Mary and Jimmy Thomas of Ocean Springs were two of the initial investors questioned. The couple did business with Gulley for 19 years. Mrs. Thomas, concerned that Gulley, a pilot, might use his airplane to flee the country, staked out the Gulley’s home in Ocean Springs, alerting police when she saw the Gulleys moving boxes around in preparation to move.
“Mrs. Thomas decided to watch him, and became alarmed that based on his conduct he showed the signs of possible flight,” Scott said. “She had filed a criminal charge against him, and notified police that he was in danger of escaping. This person was being really diligent, and I can understand in that a lot of their life’s earnings were involved in this situation. She alerted police to what she saw as a danger to him ever being held accountable.”
The Ocean Springs police responded quickly to arrest Gulley, who spent a couple of days in jail before coming up with a $200,000 bond. Then Gulley was allowed to move from Ocean Springs to Little Rock, Ark., to work with a brother pending outcome of the legal proceedings against him. A grim-faced Mary Thomas watched as furniture and other items which she thinks some of her savings helped buy were moved from the Gulley house.
The Thomases have filed a lawsuit asking for $15 million in damages from Gulley, and for the seizure of Gulley’s belongings. The lawsuit alleges the Gulley took loans from the couple’s annuity without their knowledge.
Gulley was an agent for Minnesota Mutual, which has moved into Gulley’s former office in Ocean Springs to serve former Gulley clients. A statement from Minnesota Mutual said: “We urge our customers not to worry; we are committed to doing whatever is needed to resolve this unfortunate situation.”
Scott said the investigation continues, and the SOS office expects to uncover a great deal more evidence before the case is concluded.
“This case is unfortunate, but not too unusual,” Scott said. “It involves a betrayal of a fiduciary trust owed by an investment professional to their client. You expect them to be true to their word, and invest money properly. When they don’t, there are devastating consequences, as in this case. The public has a high degree of trust in investment professionals, and the ramifications of betraying that trust extend beyond this one case and destroy public confidence in general in investing. I think the work of our office in regulating the investment industry, and in exposing bad conduct, is critical to restoring the public confidence in investing. And that is critical to our economy in general, keeping investment confidence high.”
Scott recommended that before using an investment advisor, check with the SOS’s office by calling 1-800-804-6364 to make sure the advisor is registered. Securities are also registered.
Scott said the Gulley case proved the value of the SOS’s ongoing audit program which covers a certain percentage of brokerage and investment advisor firms in the state each year. “All of the audits don’t reveal results like this, but there are other benefits to the audit program,” Scott said. “In other situations, it just serves to keep people on their toes and make them realize there is a regulatory authority that is going to hold them to standards of the law.”
The SOS office is part of a nationwide computerized registry of investment counselors. Information provided can include any disciplinary action taken against a investment advisor.
Scott said there are protections for people who have been defrauded. The SOS’s office has been in touch with Minnesota Mutual, and has been assured that the company’s intent is to take care of its investors.
“Gulley was an agent for a large national company,” Scott said. “If the company was defunct or not reputable, these people would be in a lot worse shape. But I am still very concerned for the investors until everything is taking care of, and these people are made whole.”