Texas Attorney General Must Face Securities-Fraud Charges

  • Ken Paxton argues stance on gay marriage, abortion led to case
  • Paxton accused of misleading investors while state lawmaker

Texas Attorney General Ken Paxton must face charges he broke state securities laws by soliciting investors for a friend’s technology company without revealing he was being compensated for it.

A state judge on Friday allowed the case to proceed after deciding prosecutors and the judge originally in charge of Paxton’s case correctly applied state laws and followed proper procedures.

Paxton, 52, was indicted in August after he was elected Texas’s top law-enforcement officer as part of a Republican sweep of statewide offices last year. He denies committing any crimes in connection with his business dealings.

The felony charges stem from 2011, when Paxton was a state legislator and allegedly encouraged two acquaintances to invest more than $100,000 apiece into Servergy, a technology startup. Paxton intentionally failed to tell the investors he hadn’t personally invested in the company and would get paid in Servergy shares for bringing them in, according to his indictment.

Paxton faces a lesser charge of failing to register as a securities adviser representative while steering clients of his estate-planning firm to a friend’s investment service. That charge mirrors a reprimand Paxton received from state securities regulators in May 2014, when he admitted to essentially the same conduct involving other clients and agreed to pay a $1,000 state administrative fine.

If convicted on all counts, Paxton faces from five years to 99 years in prison.

“With all due respect, we are disappointed with court’s rulings today, as we believed each of the motions was well founded,” Bill Mateja, a lawyer for Paxton, said in an e-mail. “We are currently reviewing whether to appeal the court’s denial of our applications for writ of habeas corpus and will make that decision in the near future.”

Prosecutor Brian Wice said the judge’s rulings spoke for themselves and declined to comment further.

Paxton’s lawyers attacked the indictments on 10 grounds at a Dec. 1 hearing, taking issue with the grand jury process, the law under which he was charged, the statute of limitation and other procedural issues.

Paxton’s lawyers wrote in a brief filed after the hearing that they had properly exposed flaws in the indictments. “It is disingenuous and dishonest to cast Paxton’s questioning of this process as a ‘Machiavellian plot,’” they wrote.

The indictments were obtained in the Dallas suburb of Collin County, one of the most conservative districts in Texas. Paxton’s supporters claim the charges are politically motivated by liberals retaliating for the attorney general’s opposition to gay marriage and abortion rights.

While in the Texas Legislature, Paxton co-sponsored laws restricting access to abortion and strengthening voter identification, measures he’s since defended in court as attorney general. He also drew national attention in June by exhorting Texas county clerks to follow their religious convictions and refuse marriage licenses to same-sex couples after the U.S. Supreme Court legalized gay marriage.

The cases are Texas v. Paxton, 416-81913-2015; 416-81914-2015; 416-81915-2015; 416th Judicial District of Collin County, Texas (McKinney).

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