The bad news for former West Texas Senator Carlos Uresti and San Antonio businessman Stanley Bates just keeps coming.
The U.S. Securities and Exchange Commission officially charged the two men Friday with securities fraud in an alleged $11 million oil and gas fracking Ponzi scheme.
The SEC will not have difficulty serving the federal complaint on either man. In June, Uresti was sentenced to 12 years in federal prison after being found guilty of 11 counts of fraud and money laundering. In August, Bates was arrested by FBI officials after he agreed to plead guilty to eight counts of defrauding investors.
In an 18-page complaint filed in the U.S. District Court for the Western District of Texas, the SEC’s Fort Worth Regional Office said Uresti and Bates raised $11.2 million from investors for a company they owned called Fourwinds Logistics Laredo. Fourwinds’ business plan called for the company to buy and sell sand used in hydraulic fracking to extract oil and gas from shale rock.
The SEC claims that Bates used a significant portion of the $11 million to pay for prostitutes, drugs, models to work in his office, his mother’s housing costs, child support payments, his son’s fraternity dues, designer shoes for his girlfriend and a Ferrari. He listed these charges as investor relations expenses or corporate housing.
“Bates misrepresented his background and experience, overstated the profitability and safety of the investments and failed to disclose his misuse of investor funds to make Ponzi payments to earlier investors and to make extravagant office and personal expenditures,” the SEC complaint states. “Bates also provided investors with a doctored bank statement showing FWLL had $18.8 million in the bank, when in reality FWLL had less than $100,000.”
Uresti, according to the SEC, served as Fourwinds’ corporate counsel, escrow agent, and unlicensed securities broker.
“He secured three large investors for FWLL, including a legal client and financially unsophisticated single mother for whom Uresti had obtained a large settlement after two of her children died in a car crash,” the SEC charges. “Uresti convinced his client to invest $900,000 in the FWLL venture, pocketed a large undisclosed commission and then, without her knowledge, assigned himself an additional percentage of future profits from her investment.”
The SEC also charges Uresti with making material misstatements and omissions to investors regarding the security of their investments, Bates’s background and experience, and the FWLL business.
“Lawyers and public servants have heightened responsibilities when it comes to handling other people’s money,” said Shamoil T. Shipchandler, who is director of the SEC’s Fort Worth Regional Office. “We take action today to impose an industry bar to protect investors from future fraudulent conduct.”
Mikal Watts represents Uresti. Bates lists his lawyer as a federal public defender, which is seldom a good sign when starting a case.
The SEC’s investigation was led by staff attorney Rebecca Fike and assistant director Jim Etri of the Fort Worth Regional Office. SEC trial Counsel Keefe Bernstein will lead the court proceedings for the agency.