Throughout the first half game, Cait Sith provides help and advice that more often than not gets the party into a lot of trouble. In fact, this trend gets started right off the bat, when Cloud and co. first meet the fortune teller as they are traversing the Gold Saucer.
Cloud, Cait Sith and the rest happen to arrive at the Battle Square only to find a disaster: guards and staff alike have been murdered, and there's no one around to lay blame. Initially, Cloud thinks it must have been Sephiroth—until he notices that the deceased have shot wounds. The party then notices a wounded staff member, who says the murders were committed by a man with a gun on his arm... Barret?
Just then, Dio and a few guards arrive, demanding to know who committed the atrocities, even going so far as to ask if Cloud is involved. Cloud denies having anything to do with the massacre, and Dio seems to be willing to accept it.
Until Cait Sith, in a moment of brilliance and debatably intentional incrimination, says, "Hurry and run, it's gonna get ugly," and proceeds to try to escape.
At his words and prompt exit, the party runs after him, but are soon trapped by Dio's guards. Dio is highly disappointed, and despite their protests, he provides them with a new home in the Desert Prison.
Was it just bad advice on Cait Sith's part, or was Cait Sith purposefully trying to get the party into trouble? The latter is more likely, as Cait Sith's entire purpose was to act as a means by which Reeve of Shinra could thwart AVALANCHE's plans. Reeve, at this point, means to immobilize the members of AVALANCHE so that Shinra can continue with its schemes without the threat of opposition. Making Cloud and company seem guilty of a heinous crime and consequently having them sent to an inescapable prison is the perfect resolution to Cait Sith's mission.
Unfortunately, for Cait Sith and everyone else at Shinra, the party manages to escape the prison by having Cloud participate in and win a Chocobo race.
