Grand Jury Indicts Texas Attorney General on Felony Charges

News ID: 817066 Service: Other Media
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TEHRAN (Tasnim) - Ken Paxton, the Republican attorney general of Texas and a former state legislator, has been indicted by a grand jury on charges of securities fraud and of failing to register with the state securities board, officials said.

The grand jury in the northern Dallas suburb of McKinney handed up a three-count indictment against Mr. Paxton on Tuesday, the officials said. The indictment is to be unsealed on Monday, when Mr. Paxton is expected to turn himself in to the authorities at the Collin County Jail, as reported by The New York Times on Saturday. 

The charges — two counts of first-degree securities fraud and one count of third-degree failure to register — are tied to Mr. Paxton’s work soliciting clients and investors for two companies while he was a member of the Texas House of Representatives, before he was elected attorney general in November.

In the most serious charges, first-degree securities fraud, Mr. Paxton is accused of misleading investors in a technology company, Servergy Inc., which is based in McKinney, his hometown. He is accused of encouraging the investors in 2011 to put more than $600,000 into Servergy while failing to tell them he was making a commission on their investment, and misrepresenting himself as an investor in the company, said Kent A. Schaffer, one of the two special prosecutors handling the case. The group of investors were Mr. Paxton’s friends and included a colleague in the Texas House, Representative Byron Cook.

Mr. Schaffer said Mr. Paxton’s role in misleading the investors had come to light in an investigation by members of the Texas Ranger Division. Mr. Schaffer and the other special prosecutor, Brian Wice, are Houston defense lawyers appointed by a judge to act, effectively, as district attorneys in the case.

In a statement, Mr. Paxton’s lawyer, Joe Kendall, said the judge in the case has “specifically instructed both parties to refrain from public comment on this matter, and we are honoring the Judge’s instructions.” Before the indictment, a spokesman for Mr. Paxton, Anthony Holm, was outspoken in defending Mr. Paxton. He characterized the case as a political witch hunt, suggested that an anti-Paxton blogger had engaged in jury tampering, and questioned the special prosecutors’ eagerness for news coverage and their impartiality as criminal defense lawyers.

“If society continues to overlook this witches’ brew of jury tampering, media leaks and freshman prosecutors, we may wake up to find the office of the attorney general of Texas at the mercy of two criminal defense attorneys who take checks from the very drug cartel leaders and child molesters the attorney general tries to imprison,” Mr. Holm wrote in an op-ed article in The Austin American-Statesman.

Mr. Schaffer said politics had played no part in the indictment.

“I have nothing personal against Mr. Paxton based on his politics,” he said. “Even if you found fault with Brian Wice or myself, how do you find it with the Texas Rangers? These are the most honest, straightforward, incorruptible police officers you’re ever going to find. They don’t have political motivations, and they certainly wouldn’t have any against the sitting attorney general.”

A conviction for a first-degree felony in Texas can carry a punishment of life in prison or a sentence of five to 99 years. A third-degree felony is punishable with a sentence of two to 10 years. Mr. Paxton helped create the possibility of such severe punishment: As a freshman representative in the Texas House in May 2003, he voted to amend the state securities law to make it a felony to act as an investment adviser representative without being registered, the very crime the grand jury accuses him of committing.

As the state’s top lawyer and law enforcement officer, Mr. Paxton has made headlines for challenging the Obama administration on its immigration and environmental policies and for encouraging county clerks to refuse to issue marriage licenses to gay and lesbian couples on religious grounds after the Supreme Court’s ruling upholding same-sex marriage.

Mr. Paxton, 52, was elected in November as part of a Republican sweep of the top seats in Texas government.

The case against him began in May 2014, when the Texas State Securities Board reprimanded him for failing to register as a representative of an investment adviser. He had solicited three clients for a friend’s investment firm, Mowery Capital Management, in 2004, 2005 and 2012 and was paid part of the asset management fees. At the time, he was not registered with the securities board, violating a section of the Texas Securities Act prohibiting unregistered people from acting as investment adviser representatives, according to the board’s disciplinary order. Mr. Paxton signed and did not dispute the findings. He was fined $1,000 but faced no criminal prosecution.

A nonprofit watchdog group, Texans for Public Justice, filed a complaint against Mr. Paxton after he was reprimanded, asking the district attorney in Travis County to prosecute him for felony criminal conduct. Prosecutors said that there was insufficient evidence to support a prosecution in Travis County and that any potential criminal conduct had occurred outside the county. They forwarded the investigation to Collin County.

The Collin County district attorney recused himself because of his ties to Mr. Paxton, and a state district judge in McKinney, Scott J. Becker, a Republican, appointed Mr. Schaffer and Mr. Wice as prosecutors. In May, as the Texas Rangers investigated, the judge expanded the inquiry.

Servergy has also been the subject of an investigation by the Securities and Exchange Commission. The investigation centered on whether Servergy and its founder, Bill Mapp, who has since resigned as chief executive, made misleading statements about the company to induce investors to buy Servergy stock, according to court documents the S.E.C. filed. Mr. Paxton’s name and email address appeared in documents Servergy filed to comply with S.E.C. subpoenas.

A spokeswoman for the S.E.C. declined to comment on the status of the investigation or to say if Mr. Paxton was part of it.

A Servergy spokeswoman said the existence of an investigation did not mean wrongdoing had occurred. She declined to comment on the indictment of Mr. Paxton.

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