The 'fiasco' and 'bad choices' that put 2 businessmen and 1 state senator in handcuffs

Stanley Bates faces sentencing Monday for Ponzi scheme

By Nicole Perez - Executive Producer

SAN ANTONIO - He ran the sand fracking company that became a scheme that stole thousands of dollars from investors -- a crime to which Stanley Bates pleaded guilty, avoiding trial with a former state senator and another man.

Bates never testified at the trial but is telling his story in a court filing made days ahead of his sentencing hearing scheduled for Monday afternoon.

Bates' attorney filed a sentencing memorandum in hopes of getting a sentencing below the guidelines.  Bates was portrayed as the businessman who fooled Carlos Uresti and Gary Cain -- both of whom were convicted by a jury on charges of money laundering and fraud in February.

All three were linked through the company Bates created: FourWinds Logistics, Inc. 

'It became a fiasco'

Bates said the seeds for his idea were planted in 2010.

"Mr. Bates spent his spare time scouting oil and gas rig sites. He would take beer and a hibachi grill to drill sites to network with workers," the document said. "Mr. Bates was studying an industry he hoped to break into. Through research and networking, he identified problems that the blue collar men faced at these drill sites. He then thought of solutions to fix some of these problems. This is how he came up with the idea of launching a sand fracking company."

By 2012, Bates was in business.

"Mr. Bates saw that frac sand was in high demand but very low in supply due to the logistical challenges that surround its extremely long-distance transport. What this resulted in was a product that had a very high potential for profit, and a new market niche that few had identified yet," the document said.

For a man who left home at the age of 16, worked three jobs while attending high school and later joined the United States Marine Corps, the big idea was ambitious, the document said.

"This could have been the beginning of a story of hard work and success, an outsider bootstrapping himself into a highly closed-off industry, but it instead became a fiasco. It became a fiasco due to bad market timing, bad advice and bad choices," the document said.

Getting into the oil and gas business

The document said Bates was honorably discharged from the Marines in 2002, earning awards and other honors for his service. He worked as a car salesman in Harlingen, becoming a general manager. 

By 2010, he switched careers. Bates founded B&B Advertising. Armed with that experience, Bates turned his new interest in the oil and gas industry into his next business.

"He hired friends, former business associates and former Marines," the document said.

Surrounding himself with people he knew wasn't enough to make FourWinds succeed.

"It became clear that in order to expand into the sand fracking industry, (Bates) was going to need more liquid capital. He secured lines of credit and began seeking investors," the document said.

Bates even had a fresh idea for the industry: creating a process that would allow drilling companies to track their frac sands.

What he could not predict was that sand's value would fall, leaving FourWinds holding "the bag of a commodity crash. All of FourWinds's investment in infrastructure for the transport of frac sand (along with contracts with eight mining and warehouse companies and three bare companies" became suddenly worthless," the document said.

Bates said he thought Uresti could help the business be successful.

'It was never designed to be a Ponzi scheme'

Bates said it was Nico LaHood, currently the Bexar County District Attorney, who "strongly insisted" he hire Uresti as his personal and corporate attorney.

The deal, Bates said, was that Uresti would "procure investors for Mr. Bates, as long as he was paid a percentage of each investment" to bring a "fresh infusion of capital" into the operation. Bates had "invested all of his money into FourWinds" but said he later learned his attorney wasn't who he thought he was.

"Mr Bates was not aware of Mr. Uresti's fraudulent behavior toward his client, Denise Cantu. Mr. Bates did not know that Mr. Uresti was alleged to have bribed judges or engaged in other public corruption," the document said.

Uresti represented Cantu in a civil lawsuit over an accident that killed two of her children. Cantu testified Uresti convinced her to invest nearly $1 million into FourWinds. She lost most of that money.

Uresti is facing trial this fall on charges he accepted money to help a medical services company get a contract to provide services to a jail. Prosecutors say Uresti received $10,000 per month for nearly 10 years for getting the deal, sending half of each payment to a county judge who signed off on the deal.
Bates said Uresti told him more investors were needed, advice Bates said was "self-serving."

"During this time period, Mr. Uresti served as Mr. Bates's child support attorney, Ms. Cantu's personal attorney, corporate counsel for FourWinds, escrow attorney for the IOLTA accounts and other accounts, and broker for the joint venture agreements. These various roles directly conflicted with each other," the document said. "Mr. Uresti ensured that he would continue to get commissions and fees regardless of what happened to FourWinds. Ultimately, Mr. Uresti told Mr. Bates that in order to keep the business alive, Mr. Bates would have to take extraordinary steps -- illegal steps."

Bates said he would have testified Uresti "advised him to alter the bank records" which were presented to potential investors. Prosecutors did not call him to the stand.

In just two years, Bates had gone from chief executive officer of a promising business to the man who signed the records of a Ponzi scheme that would be broken up by agents with the Federal Bureau of Investigation and the Internal Revenue Service.

"It 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," the document said.

'Out of control'

As CEO, Bates suddenly found himself in unfamiliar territory.

"None of his many medals, awards, or distinguished service recognitions prepared him for the operation of a multi-million dollar oil and gas business," the document said.

Bates had both investors and creditors demanding their money, which he used for his new "lavish lifestyle he had adopted in order to impress potential investors." He now realizes his life got "completely out of control."

"The twelve pack of beer he used to bring to drill sites to network became a highball glass of whiskey he brought to office rooms for business meetings with white-collar administrators. He started to use cocaine. He started to network in places like strip clubs," the document said. "It is unsavory and he regrets it."

Preparing for sentencing

Bates, now a convicted felon facing years in federal prison, said he has turned his life around since his arrest.

"He is now sober and has been for three years. He has consistently found work even though it has been difficult. One of his jobs involved providing disaster relief in Houston after the hurricane," the document said.

Bates said he wants to work to repay the victims of the scheme. Uresti and Cain are expected to pay more than $6.3 million in restitution to the victims.

Since his conviction, Uresti has surrendered his license to practice law and resigned from the Texas Senate. He has said he's broke, hoping a judge will sign off on an order allowing the State of Texas to pay his retirement, money his estranged wife said would be Uresti's only income. Prosecutors have said they'd collect a quarter of that monthly income to pay back the victims.

Prosecutors have not filed a response to Bates's court filing.

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