VOL. 132 | NO. 93 | Wednesday, May 10, 2017
Bates Gold-and-Silver Fraud Case Includes Big Numbers
By Bill Dries
At the end of a five-week trial in Memphis federal court this month, a jury convicted a former Tennessee state representative turned religious prophet and gold-and-silver broker on 46 counts of fraud.
Chuck Bates, left, and his father Larry Bates, right, in a 2010 video. They and other family members were convicted by a Memphis federal court jury last week of swindling $18 million from 300 customers who bought silver and gold from them.
Larry Bates, his sons Chuck Bates and Robert Bates, and Robert’s wife, Kinsey Bates, are awaiting an August sentencing by U.S. District Judge Sheryl H. Lipman in a case with plenty of big numbers.
Prosecutors described the gold and silver business as a “Ponzi scheme” with more than 300 victims taken for $18.5 million between May 2002 and October 2013, when a civil lawsuit was filed by those buying gold and silver from the Bates’ First American Monetary Consultants.
“Unfortunately, fraud, corruption and embezzlement can occur everywhere, including in the investment world,” said acting U.S. Attorney Larry Laurenzi in a written statement following the May 3 guilty verdicts. Laurenzi also urged citizens to protect themselves from “those who prey on others, like the Bates family preyed on so many innocent victims.”
The jury heard from 45 victims of the swindle and also convicted Chuck Bates on 18 counts of mail and wire fraud and one count of conspiracy. Robert Bates was convicted of five counts of mail fraud, three of wire fraud and one count of conspiracy. Kinsey Bates was convicted of one count of conspiracy and two counts of wire fraud.
Through appearances on Christian television and radio programs as well as YouTube videos, the Bates family talked of coming social and economic chaos and the need to invest in gold, silver and other precious metals to guard against the coming instability.
The Bates would get payments from customers but wouldn’t follow through on the orders. They would instead buy gold, silver and other precious metals “that were not delivered to the customer,” according to the 2015 indictment in the case.
Their tactics included “delays in returning telephone calls, transferring a customer among multiple defendants, co-conspirators and assistants who would give various excuses for the lengthy delays or claim the defendant who might be able to provide an explanation was not available or totally refuse to return calls or respond to emails from customers.”
“These delay tactics would continue for weeks, months and even years,” the indictment stated.
Attorney John Ryder was appointed receiver by U.S. District Judge Jon P. McCalla on Oct. 21, 2013, in connection with a civil lawsuit against the Bates family and First American Monetary Consultants that preceded the criminal charges.
In a complaint against the Bates family that Ryder filed with the court in August 2015, he estimated from January 2008 to his appointment as receiver, FAMC had taken in $83.3 million from customers and clients in cash and precious metals, all to buy or trade in precious metals. FAMC, according to Ryder’s accounting, spent $56 million of that on precious metals. But it was on orders from Larry Bates “in types and amounts solely decided by him,” and, according to Ryder’s complaint, Bates decided “what orders would be filled or partially filled with available metal inventory.”
In a later amended filing, Ryder chronicled transfers of cash out of FAMC by Larry Bates.
When Ryder was appointed, there were hundreds of unfilled orders from customers who had paid. He tallied those unfilled orders at $18.5 million.
In the fall of 2013, FAMC had an estimated $154,790 in assets and $19,000 in cash on hand, according to Ryder’s complaint.
The day after Ryder’s 2015 complaint, McCalla ordered U.S. Marshals to serve a writ of temporary prejudgment at Larry Bates’ farm in Middleton, Tennessee. That same week, the Bates family was indicted on federal criminal charges.
Three days later, the marshals saw and seized handwritten notes they and federal prosecutors in the criminal case claimed were by Larry Bates. The notes dated from 2014 and referred to Bates’ “enemies” by initials including J.R. The other initials matched those of attorneys representing plaintiffs in the civil lawsuit.
“J. Ryder will be in fear as I confront him in many ways,” read one note. “Your enemies will be astounded and confounded.”
Another note reads: “When I jack their jaws as I showed you it will send tremors through the legal establishment. You will be surprised who is involved in the attacks against you.”
The plaintiffs in the civil lawsuit were granted summary judgment in the case in November 2015.
In one draft of proposed jury instructions before the May verdict in the criminal trial, Bates, through his attorney, wanted the court to define the defense theory as a belief that “unforeseeable events caused FAMC to fail to deliver, or only partially deliver, some of its customers’ orders.” It also cited the “national and global economic crisis” that was a central selling point in the scheme pushed through appearances on Christian television and radio programs as well as conferences across the country where Bates made personal appearances and billed himself as a doctor in economics.
“The fact that errors in management occurred and the business failed is a terrible shame, but does not amount to a crime,” the proposed jury instruction concluded.