Texas AG Ken Paxton strikes deal to resolve 2015 securities fraud charges
HOUSTON – Texas Attorney General Ken Paxton and prosecutors have agreed to dismiss almost 9-year-old criminal charges if the Republican state official completes community supervision and pays about $270,000 in restitution.
Terms of the 18-month intervention agreement, announced Tuesday in a pretrial hearing that had been delayed from last week, also include 100 hours of community service and 15 hours of legal education classes focused on ethics.
Paxton was to face trial on April 15 on three felony counts, including two charges of securities fraud. If Paxton, who was in the courtroom Tuesday, completes the terms of the arrangement, the charges will not appear on his record.
Defense lawyers said Paxton did not admit guilt under the agreement, which was proposed by prosecutors.
“After he completes the conditions that the Special Prosecutors proposed, the case will end without any admissions on his part or any finding of guilt – because he’s not guilty of anything in this case,” Paxton lawyer Dan Cogdell said in a statement.
Paxton was accused of soliciting investors into Servergy Inc. in 2011 without disclosing that the McKinney tech company was paying him a commission.
After Paxton lined up $840,000 from investors, about one-third of all investments into Servergy that year, the company compensated him with 100,000 shares worth $1 a share, according to court records.
Four of the investors belonged to a private investment club that included Paxton. Club members agreed that they would watch out for each other and that nobody would exploit the group for personal gain, court records said. Club members also told investigators that they would not have invested in Servergy had they known the company was paying Paxton.
The 2015 indictments against Paxton named two club members as victims of securities fraud – state Rep. Byron Cook, who has since retired from the House, and Florida businessman Joel Hochenberg. Each invested $150,000 in Servergy.
The Securities and Exchange Commission sued Paxton alleging securities fraud over his dealings with Servergy, but a federal judge dismissed the lawsuit in 2017, ruling that federal law did not require Paxton to disclose his payment from the tech company.
Paxton, a 61-year-old Republican, is one of the country’s most well-known state attorneys general after leading multiple legal attacks on policies implemented by Democratic presidents. He was elected in 2014 and is serving his third four-year term.
The criminal case has dogged Paxton nearly his entire tenure as the state’s top legal officer. Seven months into his first term, Paxton was booked into the Collin County Jail, photographed and released after grand jury indictments accused him of two counts of securities fraud, a first-degree felony, and one count of failing to register with state securities regulators, a third-degree felony.
Paxton could have faced up to 99 years in prison for the most serious charges, as well as fines.
The case has faced myriad delays as a team of appointed special prosecutors fought Collin County officials over compensation and sparred with Paxton’s legal team over where the attorney general should face trial. Paxton’s lawyers also sought, unsuccessfully, to have the charges dismissed by three different courts.
The case has also bounced between a handful of judges in Collin County and Harris County before it landed last year in the 185th District Court in Houston, where Judge Andrea Beall presides. At the most recent hearing in February, one of the prosecuting attorneys withdrew from the case because of a lack of pay and a disagreement with the lead prosecutor Brian Wice over legal strategy.
At the same hearing, Beall denied a motion from Paxton to dismiss the case over the lengthy delays.
The attorney general also faces other legal issues, including an unresolved whistleblower lawsuit from four former top officials who claim they were improperly fired from the attorney general’s office after accusing Paxton of bribery and other misconduct.
A lawsuit by the State Bar of Texas also accuses Paxton of violating his duties as a lawyer by misrepresenting a legal matter to the U.S. Supreme Court. Paxton had asked the high court to overturn Democratic victories in four swing states in the 2020 presidential election, saying Texas had proof voter fraud changed the outcome.