Government finds businesses, money trail of Ponzi scheme co-defendant who said he had no assets
Report details companies, revenue, spending since Stanley Bates' arrest
SAN ANTONIO – The man who owned the sand fracking company that was a front for a Ponzi scheme which conned investors out of hundreds of thousands of dollars and led to the downfall of his partners -- including a former state senator -- used the name of a dead man and hid income and assets from the federal government, a document filed by prosecutors said.
The Government's Status Report, filed Wednesday, said Stanley Bates signed a Financial Disclosure Statement Form on May 30, 2018, saying he had "no vehicles and no assets." In the last month, investigators have uncovered Bates had ties to three businesses in 2017 -- one of which was set up a month before Bates was arrested on charges of fraud and money laundering that May.
Bates created FourWinds Logistics Inc., in 2012. He was portrayed as the businessman who fooled Carlos Uresti, then a state senator and attorney, and Gary Cain -- both of whom were convicted by a jury on charges of money laundering and fraud in February. Uresti was sentenced to 12 years in prison, Cain nearly six years.
Instead of standing trial with his former partners, Bates pleaded guilty. In a sentencing memorandum to the judge filed earlier this month, Bates asked the judge for leniency. He claimed Four Winds "was never designed by Mr. Bates to be a Ponzi scheme. It was a business plan that failed because of bad market timing, bad advice, and bad choices," and said he had turned his life around since his arrest.
Since then, the government started looking into Bates's financial history, "focusing on transactions occurring shortly after (Bates) was indicted, while (Bates) was on bond, and after (Bates) entered a guilty plea before this Court," the document said. What they found, the document said, were transactions that led them to believe "(Bates) was being less than forthcoming about his financial dealings with certain companies and individuals, particularly his income and access to certain assets."
Three businesses in which Bates had a claim were previously not revealed to government investigators, including the U.S. Probation investigators who submit a report recommending sentencing guidelines to the judge. Those include Bates Energy Oil & Gas, LLC, which received a state certification in February 2017; Unlimited Frac Sand, LLC, which received a state certification in May 2017; and Gator Disaster Recovery, LLC, which received a state certification in September 2017.
The document said the business bank accounts showed deposits of between $66,744.55 and $1,033,724.23. All of the accounts had debits reducing them to just a few thousand dollars.
While Bates's court filing said trying to stay ahead of investors and creditors made his life go "completely out of control," he said he had become sober and wanted to repay those whose money he said used to fund his expensive lifestyle, prosecutors said income by Bates's new businesses paid for food, travel and entertainment, "including a trip to Taos, New Mexico, in March 2018."
Bates was listed as an authorized signer on the bank account of Unlimited Frac Sand, but one partner in the company drew suspicion: Phillip Stanley.
"Agents interviewed Mr. Stanley's widow who reported Mr. Stanley was diagnosed with colon cancer in 2015 and had been out of work since 2014 due to his poor health. Mr. Stanley moved to Odessa in late 2015 or early 2016, to live near his daughter while being treated for cancer. She reported that Mr. Stanley ended his battle with cancer on June 25, 2017, and was never associated with Unlimited Frac Sand or Frac Sand Unlimited," the document said. "Agents interviewed Mr. David Bravo who reported that (Bates) often used the name Phillip Stanley as his alias following the negative attention he was receiving from the criminal case."
Bates also told the judge, "He has consistently found work even though it has been difficult. One of his jobs involved providing disaster relief in Houston after the hurricane."
Hurricane Harvey struck the Houston area on Aug. 26, 2017. Within two weeks, Gator Disaster Recovery was formed, prosecutors said. Bates and Audra Vega, who had been engaged to Bates, were authorized signers on the company's bank account. The pair signed all checks on the account, prosecutors said.
"While some expenses appear to be for items related to a disaster recovery and clean-up business, including payroll, a significant portion of debits reveal expenses for gasoline, food, hotel, travel and entertainment. The account had a negative balance after December 31, 2017," the document said.
Prosecutors also noted a series of wire transfers by Bravo to Bates totaling $39,516 between August 2017 and April 2018, one of which was made in cash.
"When asked whether there were any written sales reports and contracts that could substantiate the amount given to (Bates) or an amount due, Mr. Bravo reported having nothing in writing. Mr. Bravo reported having no e-mails, written sales contracts or written employment contracts to show that payments to (Bates) were indeed commissions earned by (Bates)," the document said.
Bates, who said he worked as a car salesman after he served in the Marines, told prosecutors he had no vehicles. However, investigators have since learned otherwise.
"Between 2006 to the present, Mr. Bates had a total of 21 vehicles registered in his name, many of which have since been titled in others' names. The most recent title involved a 2007 Mercedes Benz S550. The vehicle's most recent registration expired June 30, 2018, but has since been registered in another name. A 2015 Mercedes Benz G550 was last registered to (Bates) in October 2017, and is currently held in title by a third-party," prosecutors said.
The document also said Bates energy Oil & Gas and Unlimited Frac Sand are named in pending civil lawsuits.
Bates is scheduled to appear in court for sentencing on Sept. 11.
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