State Sen. Carlos Uresti, accused of misleading a former client who invested in a company in which Uresti has a financial stake, was indicted by a federal grand jury on 11 charges over his involvement in the alleged investment Ponzi scheme — in addition to a separate indictment alleging bribery.
In the first indictment, the federal grand jury charged Uresti, a San Antonio Democrat, with one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering. The indictment also charges Uresti with five substantive counts of wire fraud; two counts of securities fraud; one count of engaging in monetary transactions with property derived from specified unlawful activity; and one count of being an unregistered securities broker.
A separate indictment centered on a contract to provide medical services to a correctional facility in West Texas. That indictment alleges that a colleague of Uresti’s, Vernon C. Farthing III, paid Uresti $10,000 per month as a marketing consultant and that half of the money was given to a Reeves County official to win over his vote to award the contract to Farthing’s company — the culmination of a 10-year scheme involving bribery and money laundering.
Uresti did not return phone calls Tuesday, and his office had no comment on the indictment.
It was the frack sand case that received the most scrutiny in recent months.
Uresti, a personal injury attorney, has been entwined in a complicated saga involving FourWinds Logistics, which sold sand used in hydraulic fracturing, a process that extracts oil and gas from shale rock.
A lengthy investigation published by the Express-News in August first detailed Uresti’s involvement in the company and fraud allegations it faces.
Three months later, Uresti coasted to re-election, winning his San Antonio seat with 56 percent of the vote against Republican and Libertarian challengers. Uresti is among the Legislature’s most powerful Democrats. He is vice chair of the Health and Human Services committee and sits on three other high-profile committees: Finance, Education and Veteran Affairs & Border Security.
In February, the FBI and IRS raided Uresti’s law office. In a statement at the time, the senator said he was cooperating with federal agents as they were “reviewing our documents as part of their broad investigation of the FourWinds matter.”
FourWinds’ purported intent was to buy sand and sell it at a markup to oil and gas companies, but some investors have accused the company’s leadership of misrepresenting its financial health and spending their money on frivolous, personal expenses. It now faces millions of dollars in claims from investors and other companies.
Denise Cantu, whom Uresti represented in a wrongful-death case, said she lost most of the $900,000 she invested in the now-bankrupt company in 2014 at the suggestion of Uresti, according to the Express-News. She has said she was not initially aware that Uresti would get a piece of her investment, though Uresti has suggested otherwise.
With allegations of serious financial mismanagement detailed in bankruptcy court, the FBI last year opened an investigation into FourWinds, the Express-News reported. In August, Uresti told the paper that he was a “witness” in that investigation but not its target.
On Nov. 4, four days before Election Day, Eric Nelson, the former marketing director for FourWinds, was indicted for his role in an alleged scheme to defraud investors. He later pleaded guilty to one felony charge of conspiracy to commit wire fraud. Federal attorneys accused Nelson of altering company bank statements to “grossly” inflate its account balance. At least two more former FourWinds employees have been indicted since the election: Shannon Smith, who held a 48 percent stake in the company, and Laura Jacobs, who worked as its comptroller. They face similar charges to Nelson’s.
FourWinds had paid Uresti to attract investors before it filed for Chapter 11 reorganization in August 2015 — beset by allegations of fraud and misused funds.
On Tuesday, the federal grand jury also issued similar charges against FourWinds CEO Stanley Bates and Gary Cain, a company consultant.
Cantu’s 13-year-old daughter, four-year-old son and two friends were killed in 2010, when a tire on her SUV blew out, causing the vehicle to roll over. Her legal team, which included Uresti, secured the wrongful-death settlement in 2013, and about a year later, she said she decided to invest the bulk of the money into FourWinds at Uresti’s urging.
Stan Bates, the company’s CEO and majority owner, told Cantu in text messages that Uresti was sharing 10 percent of the profits from her $900,000 investment, court records show.
Documents in the company’s bankruptcy proceedings list Uresti as owner of a 1 percent stake in FourWinds. Also, the company granted Uresti a $40,000 loan in June of 2014, and hired him to perform legal services, the documents show.
In August, Uresti told the Express-News that the company never transferred stock certificates to him, and the transfer was never registered by the Secretary of State.
But on his 2015 Personal Financial Statement, a document Texas lawmakers must file to the Texas Ethics Commission to shed light on their sources of income and affiliations, Uresti listed owning between 100 and 499 shares of FourWinds stock.
That document, first filed in February of last year, did not originally disclose the $40,000 loan. Nor did it show that he served on the board of one of the company’s joint ventures.
Uresti corrected the document in August, following the Express-News investigation. He called it an “oversight” that “won’t happen again,” the newspaper reported at the time.
Uresti could face up to 20 years in federal prison if convicted of the fraud-related charge, and the money laundering charge carries prison time of up to 10 years. If convicted of being an unregistered securities broker, Uresti could spend up to 20 years in federal prison.
In the Reeves County case, Uresti could face up to five years in federal prison if convicted of conspiracy to commit bribery, and up to 20 years if convicted of the money laundering charge.
Uresti is expected to appear before U.S. Magistrate Judge Henry Bemporad at 11 a.m. tomorrow in San Antonio.