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In fraud trial, lawyer for Carlos Uresti claims senator’s ignorance of business partners’ wrongdoing

In opening arguments in the federal criminal case against state Sen. Carlos Uresti, prosecutors alleged that he used his reputation as a public official to lend credibility to a frac-sand company's Ponzi scheme. But defense attorneys for the San Antonio Democrat claim he was never aware of the company's criminal activity.

State Sen. Carlos Uresti, D-San Antonio, arrives at the federal courthouse in San Antonio on Wednesday, Jan. 17, 2017.

SAN ANTONIO — The criminal case against Democratic state Sen. Carlos Uresti, Assistant U.S. Attorney Joe Blackwell told jurors Monday morning, was “birthed in loss” — but it ended with both “loss and profit.” 

The prosecutor said the losses were suffered by Denise Cantu, whose son and daughter were killed in a 2010 car wreck that would ultimately, with Uresti’s legal representation, win her a substantial wrongful death settlement. And the profit, Blackwell said, also came at her expense, when she lost the bulk of $900,000 she invested at Uresti’s recommendation with FourWinds Logistics, a now-defunct frac-sand company where Uresti worked as general counsel and owned 1 percent of shares. 

The largest question looming in the federal felony case against the San Antonio senator is whether he was aware of the Ponzi scheme that effectively robbed Cantu and a slate of other large-stake investors. Blackwell alleged in opening arguments that Uresti used his reputation and prominent position to lend credibility to the fraudulent scheme. Defense attorneys claim that Uresti didn't know about FourWinds’ shady dealings.

“There’s not a question of fraud in this case,” defense attorney Michael McCrum said. “Fraud did happen. People pled guilty to it. But the people on the outside didn’t know about it. That’s why we’re here.”

Three FourWinds employees, including Chief Operating Officer Shannon Smith, entered into plea deals in 2016 and are expected to testify for the government starting Tuesday. And FourWinds CEO Stanley Bates, co-defendant with Uresti, unexpectedly pleaded guilty to eight felony charges earlier this month.

Lawyers on both sides argued for about four hours Monday to a jury warned several times by U.S. District Judge David Ezra to disregard widespread media reports on the case. The courtroom was packed with Uresti's family, so full in the morning that would-be spectators — including Uresti's father – were at first turned away. Flanked by his defense attorneys, the senator listened attentively throughout, his face always directed toward the jury. 

Uresti's co-defendant Bates was in dire financial straits when he launched FourWinds, which purported to sell sand to fracking companies. Prosecutors said Bates and his associates falsified bank statements, in one instance claiming there was nearly $19 million in an account of under $100,000, to assuage skeptical investors.

Still, prosecutors argued, potential investors remained wary of the relatively unknown company. Enter Uresti, a veteran state legislator, a reputable local lawyer and a member of a San Antonio family so prominent that its name calls out to drivers several times on stretches of nearby highway.

“Uresti had something Stan Bates didn’t — a well-known name, respected attorney, state senator,” Blackwell said. “He was someone that could bring credibility to FourWinds.”

That reputation helped lock in hesitant investors, and that, along with Uresti’s personal relationship with Cantu — he denies her claim that the relationship was sexual — secured millions in investments for the fraudulent company, prosecutors alleged. Investors were told that their money was being used to purchase sand, which would be sold at a markup to oil companies, prosecutors said. In fact, according to the prosecution, FourWinds leadership used it to pay themselves and to cover extravagant personal expenses.

Uresti’s lawyers did not deny on Monday that Uresti’s reputation lent credibility to a sketchy operation. But, they insisted, Uresti was never aware that the business didn’t merit that credibility.

“Senator Uresti never asked to look at the books,” McCrum said. “The evidence is going to show that he had no idea what was going on with the books.”

Uresti’s defense team hammered home the point that Uresti should be presumed innocent, acknowledging that jurors might carry biases against politicians. His 11 felony charges could carry decades in prison as well as millions of dollars in fines. And if convicted, Uresti would lose his long-held seat in the Texas Legislature, though he could continue to serve during the appeals process.

The trial is expected to continue for about three weeks in San Antonio.

Uresti is also set for a May trial in a separate bribery case. Indictments for that case, as well as the fraud case currently being heard, were both handed down in May 2017 after a February FBI raid of Uresti’s law offices.

The senator has also been accused of sexual harassment at the Texas Capitol, charges he emphatically denies. Those allegations will not be permissible evidence in court, the judge ruled last week. 

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Courts Politics State government Carlos "Charlie" Uresti