SAN ANTONIO – State Sen. Carlos Uresti has appealed the disqualification of his counsel in a fraud case involving claims the current lawmaker was once involved in a Ponzi-like scheme that defrauded a woman who was a client of the litigator.  

Attorney Mikal Watts was banned from the case by Magistrate Judge Henry Bemporad on the grounds he had a conflict of interest stemming from work he once did for the woman, who is now also a government witness in another case against Uresti. Uresti filed his appeal Aug. 7.

Denise Cantu was involved in a tire rollover accident in 2010 that killed two of her young children. After winning a judgment in the case and entering into a consultation and contingency fee agreement with Uresti’s law firm, Cantu alleged that she was convinced by him to invest most of her $900,000 settlement in a business that netted Uresti at least a $27,000 commission.

Earlier this year, Uresti was charged in an 11-count indictment in Four Winds, that same now-bankrupt San Antonio-based frac sand business that prosecutors have since vilified as a Ponzi scheme that preyed on investors like Cantu, according to the Texas Tribune. Former Four Winds CEO Stan Bates and company consultant Gary Cain have also been indicted in connection with the alleged scam.

Ursti also faces charges of securities fraud, wire fraud and acting as an unregistered securities broker.

According to the motion to disqualify filed by the San Antonio court, sometime in 2011 Uresti referred Cantu’s civil case to Watts’ law firm in return for a cut of the legal fees if they prevailed. The motion states part of the arrangement called for Uresti to secure a $200,000 loan from Watts against fees he anticipated pocketing from Cantu’s settlement.

In disqualifying Watts from the current case, Bemporad ruled his dealings amounted to him serving as counsel for one client against a former one. The judge also ruled the conflict outweighed Uresti’s Sixth Amendment right to choose his own legal counsel.

Watts has countered that because of his “complete immersion” in unrelated BP oil spill litigation his role in the Cantu case was only minimal at best.

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U.S. District Court for the Western District of Texas San Antonio Division
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