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Spokane, Washington  Est. May 19, 1883

Texas attorney general indicted on felony securities fraud charges

Paxton
Associated Press

AUSTIN, Texas – A grand jury has indicted Texas Attorney General Ken Paxton on felony securities fraud charges that accuse the Republican of misleading investors before he took over as the state’s top law enforcement officer, a special prosecutor said Saturday.

Kent Schaffer, a Houston attorney appointed by a judge to the case, told the New York Times that a Texas grand jury indicted Paxton on two counts of first-degree securities fraud and a lesser charge of not registering.

The most serious allegation is that he encouraged investment in McKinney-based tech startup company Servergy Inc., which is now under investigation by the Securities and Exchange Commission. The Associated Press reported Paxton’s involvement with the company – and that a federal investigation was under way – last month.

Paxton also was fined last year for not disclosing to Texas securities regulators that he was getting commissions for soliciting investors.

Paxton’s lawyer and a spokesman for his office didn’t respond to messages seeking comment Saturday by the AP.

Paxton’s aides have said the investigation in Collin County, home to McKinney, was politically motivated.

Schaffer told the New York Times that the allegations regarding Servergy are first-degree securities fraud. He said Paxton is accused of encouraging investors in 2011 to put more than $600,000 into Servergy, while not telling them he was making a commission on their investment and misrepresenting himself as an investor.

He said Paxton is expected to turn himself in to authorities in Collin County on Monday, the same day the new indictment is expected to be unsealed.

Conviction of a first-degree felony in Texas carries a punishment of five years in prison to life.

Paxton is also accused of failing to register as a solicitor while taking commissions for referring law clients to a financial investor. That charge, a third-degree felony, could bring two to 10 years in prison if convicted.

Paxton accepted a $1,000 fine from the Texas State Securities board last year. At the time, the state board declined to pursue criminal charges. But the matter was revived after a complaint by the left-leaning watchdog group Texans for Public Justice and a judge ultimately appointed two special prosecutors – Schaffer and Brian Wice.