Eagle Ford Shale Contractor Jose Flores, III, indicted by federal grand jury for bank fraud

By: Jose G. Landa
Copyright 2013

A United States District Court for the Western District of Texas, Del Rio Division, grand jury indicted Eagle Passan, Jose Flores, III, an Eagle Ford Shale contractor, on July 17, 2013, in Del Rio, Texas, on two counts including bank fraud and fraud by wire, radio, or television.

The two-count sealed indictment was unsealed on Wednesday, July 17th, with Defendant Jose Flores, III, being arrested on Tuesday, July 23rd, and appearing before United States Magistrate Judge Collis White for the Western District of Texas, Del Rio Division, on the same date for his initial appearance. Flores is represented by San Antonio criminal defense attorney Michael McCrum. The United States of America is represented by Assistant United States Attorney Timothy Adam Duree. Flores was read his legal rights and the criminal indictment and was granted conditional pre-trial release on an unsecured $20,000 bond by U.S. Magistrate Judge Collis White at the July 23rd initial court appearance hearing.

The federal indictment alleges that “between approximately April 2011 and September 2011, the Defendant, Jose Flores, III, devised and executed a scheme and artifice to defraud TAB Bank, Inc. (“TAB”) by fraudulently submitting an illegitimate invoice from a fictitious client to TAB. The purpose of this submission was to deceive TAB into believing that the Defendant’s company was awaiting payment on thousands of dollars of accounts receivable so that TAB would advance $35,000 to the Defendants’ company.” TAB deposits are insured by the Federal Deposit Insurance Corporation(“FDIC”) and its headquarters are in Ogden, Utah.

The federal indictment further alleges that “during the time period relevant to this indictment, the Defendant and his spouse were the owners and sole officers of a company called N5 Group, LLL (“N5″). This business entity was affiliated with JSML, LLC, another limited liability company co-owned by the Defendant and his spouse. JSML, LLC routinely did business as King Construction. Each of these businesses was located in Eagle Pass, Texas, in the Western District of Texas. Through their commercial enterprises, the Defendant and his spouse attempted to serve as raw materials transportation providers to businesses in Eagle Pass, Texas, and to companies operating in the Eagle Ford Shale in South Texas.”

The indictment alleges that “at the same time, M.B. was beginning to work as a fledgling entrepreneur in Eagle Pass. M.B. established BB Paving, Inc. (“BB Paving”), a company that he hoped would provide services to the sundry oil field concerns developing the Eagle Ford Shale.”

“On April 18, 2011, the Defendant and his spouse, as officers of N5, executed a Large Fleet Accounts Receivable Financing Application with TAB. Several day thereafter, the application was approved and N5 opened an account with TAB,” states the indictment.

“On July 1, 2011, the Defendant, on behalf of N5, submitted an invoice to TAB for an account receivable to be factored. According to this invoice, N5 had performed more than 680 hours of work for BB Paving in June and July 2011. As putative validation for this invoice, the Defendant included 70 time sheets detailing the hours allegedly worked by several truck drivers. For this work, the Defendant claimed that BB Paving owed $51,000 to N5,” alleges the indictment.

“All of the BB Paving invoices submitted by the Defendant to TAB were completely fraudulent, and all of the time sheets provided by the Defendant were wholly falsified. In actuality, N5 had performed absolutely no work for BB Paving. BB Paving, therefore, owed nothing at all to N5,” states the indictment.

“Unaware that the invoice was illegitimate, TAB decided to factor N5’s accounts receivable with BB Paving and agreed to advance to N5 a portion of the money allegedly owed by BB Paving. Thus, on July 20, 2011, TAB sent $35,000 via wire transfer to a bank account held by N5. Thereafter, TAB had great difficulty contacting both the Defendant and BB Paving. Ultimately, the Defendant stopped responding to TAB’s inquiries entirely. In September 2011, approximately two months after making the $35,000 payment to the Defendant, TAB received an email from M.B. informing the bank that N5 had never performed any work for any company owned by M.B.,” alleges the indictment.

Count One charges the Defendant Jose Flores, III, of committing bank fraud when “on or about July 11, 2011,…the Defendant submitted to TAB Bank, Inc., a false invoice in the amount of $51,000 for payment allegedly owed by BB Paving to N5 Group, LLC….The Defendant received payment from TAB Bank, Inc., in the amount of $35,000 for this fictitious invoice.”

Count Two charges the Defendant Jose Flores, III, of “on or about July 11, 2011,…the Defendant Jose Flores, III, having devised and intending to devise a scheme and artifice to defraud, and for obtaining money by means of false and fraudulent pretenses, representations, and promises, transmitted or caused to be transmitted by means of wire communication in interstate or foreign commerce, writings, signs, signals, pictures, and sounds for the purpose of executing such scheme or artifice, in violation of Title 18, United States Code, Section 1343.”

The indictment also seeks forfeiture of assets belonging to Defendant up to the amount of $35,000; a money judgment equal to the amount of $35,000; and substitute any assets of Defendant up to the amount of $35,000 to satisfy any money judgment against Defendant.

If found guilty, Defendant Jose Flores, III, faces on Count One for Bank Fraud up to 30 years imprisonment, up to a $1,000,000 fine, up to 5 years of supervised release, and a $100 special assessment; and on Count Two for Fraud by Wire up to 20 years imprisonment, up to a $250,000 fine, up to 3 years of supervised release, and a $100 special assessment.

An indictment is merely a charge and should not be considered evidence of guilt. All Defendants are presumed innocent until proven guilty in a court of law.

In addition to working in the Eagle Ford Shale, Defendant Jose Flores, III, also worked as a sub-contractor in the construction of the Eagle Pass Independent School District Student Activity Center although the indictment does not include any allegations regarding the EPISD Student Activity Center.

The U.S. Federal Bureau of Investigation (“FBI”) and the Texas Department of Public Safety Texas Rangers are jointly investigating any corruption in Maverick County and any person with any information may contact the FBI at (210) 225-6741.