Texas AG Arrested for 3 Felony Charges

by | August 3, 2015

By Patrick Svitek

Texas Attorney General Ken Paxton, the state’s top law enforcement officer, turned himself into jail Monday to be booked on felony securities fraud charges.

Wearing a pin-striped suit and a red tie, he smiled slightly for his mugshot. Then, he was promptly released from the Collin County Jail on $35,000 bond, according to records with the local sheriff’s office. Afterward, he apparently slipped out of the courthouse undetected, avoiding the throng of waiting media and Democratic protesters.

Within minutes, Democrats and liberal groups began calling for his resignation. An indictment is not a finding of guilt, however, and Paxton has no obligation to step down. On Monday afternoon, Paxton's lawyer released a statement saying that he would plead not guilty and seek a trial by jury.

"He is looking forward to the opportunity to tell his side of the story" in court, said attorney Joe Kendall. "In the meantime, the Attorney General is returning to Austin to focus on his work on behalf of the citizens of Texas."

Paxton faces three counts: two for securities fraud, and another for acting as an investment advisor or representative without registering.

The indictments were unsealed Monday. They allege that Paxton offered to sell two people more than $100,000 worth of stock in a McKinney technology company, but didn’t disclose that the company was compensating him.

Paxton also didn’t make clear that he hadn’t personally invested in the company, the indictments allege. He received 100,000 shares, but that was in the form of compensation, according to the indictment.

One of the alleged victims in the case is listed as state Rep. Byron Cook, R-Corsicana. The other is identified as Joel Hochberg.

The indictment comes as Servergy is in its own legal trouble. Federal investigators are looking into whether it defrauded investors with false claims about the sales of its data servers and their technological capabilities, according to court filings.

The Texas GOP quickly jumped to Paxton's defense. The statewide party released a statement minutes after his booking that criticized the “sloppy process” that led to the charges.

“Ken Paxton, like all Americans, deserves to have his say in a court of law, rather than be judged in a court of public opinion that is presided over by liberal interest groups,” said Aaron Whitehead, the party’s spokesman.

But Democrats and liberal groups immediately called for his resignation.

“Ken Paxton has abused people’s faith in his public office,” said Craig McDonald, executive director of Texans for Public Justice, which filed a criminal complaint related to Paxton’s case. “He has engaged in outright deception to personally profit at others’ expense. These qualities make him dangerously unfit to be attorney general.”

Much of Paxton’s case has played out in public since even before he was elected in 2014. The State Securities Board first investigated him while he was a member of the Texas Senate. The board reprimanded and fined him $1,000 last year after he admitted to soliciting investment clients for a friend and business partner without properly registering with the state.

The case lay dormant for months – aside from efforts by election opponents to use it against him. Then, around the turn of the year, the public integrity unit in the Travis County district attorney’s office briefly investigated — and then decided that it didn’t have jurisdiction to file charges. The case moved to Collin County, where the district attorney assigned two special prosecutors from Houston to take charge.

Anthony Holm, a Paxton spokesman, has harshly criticized the work of those two prosecutors, Kent Schaffer and Brian Wice. News has regularly leaked out about their investigation, and Holm has accused them of being politically motivated publicity hounds.

Some conservatives have compared the case to other indictments of Texas Republican leaders, including former Gov. Rick Perry and former U.S. House Majority Leader Tom DeLay.

The special prosecutors have denied any political motives, nothing that they were appointed by a Republican judge from one of the most conservative areas in the state. Wice, in fact, worked as a defense attorney for DeLay during his criminal case.

The Texas Tribune | The Texas Tribune