SEC Charges Former Texas State Senator and CEO with Securities Fraud
Litigation Release No. 24296 / September 28, 2018
Securities and Exchange Commission v. Carlos I. Uresti and Stanley P. Bates, No. 5:18-cv-01013 (W.D. Tex., filed Sep. 28, 2018)
Washington D.C., September 28, 2018 - The Securities and Exchange Commission today announced charges against former Texas state senator Carlos I. Uresti and Stanley P. Bates for securities fraud and other violations of the federal securities laws.
According to the SEC's complaint, filed in the United States District Court for the Western District of Texas - San Antonio, Bates founded and served as CEO of FWLL, LLC (a/k/a Fourwinds Logistics Laredo) ("FWLL") to buy and sell sand used in hydraulic fracking to produce oil. The complaint alleges that Uresti, then a licensed attorney and Texas state senator, provided a veneer of credibility to FWLL and served as the company's counsel, broker, and escrow agent. Together, Uresti and Bates allegedly raised over $11 million by misrepresenting the profitability and safety of investments in the FWLL venture, including presenting a doctored bank statement to investors showing that FWLL had over $18 million in cash, when in reality the company had less than $100,000. According to the complaint, Uresti convinced one of his legal clients, a financially unsophisticated single mother, to invest $900,000, which came from a wrongful death settlement that Uresti had secured on her behalf after the death of two of her children. Uresti allegedly received large, undisclosed commissions for his solicitations, and Bates spent most of the investors' money on lavish and improper payments and expenses.
The SEC's complaint charges both defendants with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, the registration provisions of Sections 5(a) and 5(c) of the Securities Act, and the broker-dealer registration provisions of Section 15(a) of the Exchange Act. Bates has agreed to settle the Commission's action against him and consented to a final judgment that permanently enjoins him from violating the aforementioned provisions of the federal securities laws, imposes a conduct-based injunction and officer and director bar, and deems his disgorgement satisfied by the restitution ordered against him in the criminal matter described below. Bates also agreed to settle the proposed administrative proceeding by consenting to associational and penny stock bars.
In related criminal proceedings earlier this year, a federal jury found Uresti guilty on 11 felony counts, including two counts of securities fraud, while Bates pleaded guilty to eight felony counts, including securities fraud. Uresti and Bates were both sentenced to serve terms of imprisonment of 12 and 15 years, respectively, and both were ordered to pay a total of $6.3 million in restitution.
The SEC's investigation was conducted by Rebecca Fike and supervised by Jim Etri and Eric R. Werner of the SEC's Fort Worth Regional office. The SEC's litigation will be led by Keefe Bernstein and supervised by B. David Fraser. The SEC appreciates the assistance of the U.S. Attorney's Office for the Western District of Texas and the Federal Bureau of Investigation.