Texas Attorney General Ken Paxton surrenders following indictment

Texas Attorney General Ken Paxton mugshot
Source: Collin County Jail -Ken Paxton mugshot

COLLIN COUNTY, Texas (KXAN) — Texas Attorney General Ken Paxton turned himself into the Collin County Jail on Monday morning. According to court records, Paxton was booked into the jail before 10:30 a.m.

The 52-year-old has officially been charged with two counts of securities fraud over $100,000 and one count for representing as an investment adviser without registration.

Paxton Indictments

Paxton arrived to the jail in a black SUV and within 15 minutes he was booked and released on a personal recognizance bond.

KXAN’s Chris Sadeghi caught the Attorney General’s departure on camera

In July, special prosecutors presented evidence in Collin County alleging Paxton committed securities fraud in a case stemming from his solicitation of investment clients several years ago while in private practice. Prosecutors in the Travis County-based Public Integrity Unit closed their investigation into Paxton in January saying there wasn’t sufficient evidence to prosecute Paxton in Travis County.

After the indictments were unsealed, Paxton’s attorney, Joe Kendall, issued the following statement:

Attorney General Ken Paxton will plead not guilty to these accusations and he will demand a trial by jury. He is looking forward to the opportunity to tell his side of the story in the courtroom of Tarrant County Judge George Gallagher, who was appointed to the case after Judge Chris Oldner’s recusal on July 29. Judge Gallagher has given instructions to make no further public comments or publicly speculate on events. Attorney General Paxton and I intend to comply with Judge Gallagher’s instructions. In the meantime, the Attorney General is returning to Austin to focus on his work on behalf of the citizens of Texas.

Media from across the state set up at the Collin County courthouse awaiting remarks from Texas Attorney General Ken Paxton.
Media from across the state set up at the Collin County courthouse awaiting remarks from Texas Attorney General Ken Paxton. (KXAN Photo\Frank Martinez)

Just as Perry was allowed to finish his term after his indictment, Paxton can stay on the job while his criminal case proceeds.

The booking documents released Monday by the jail in Paxton’s hometown of McKinney, a Republican stronghold near Dallas, show that he faces with two counts of first-degree securities fraud and a lesser charge of failing to register with state securities regulators. Each of the fraud counts carries a punishment of five to 99 years in prison.

Questions about Paxton’s financial dealings shadowed the tea party conservative throughout his first seven months on the job. His aides have denied any wrongdoing by Paxton and described the criminal investigation led by two special prosecutors as a political smear campaign.

Among the allegations is that Paxton encouraged investment in Servergy Inc., a tech startup under investigation by the Securities and Exchange Commission. The Associated Press last month reported the connections between the company and Paxton, who listed himself as a shareholder and whose name is among search terms that Servergy attorneys used to satisfy a federal subpoena.

In the middle of last year’s heated Republican primary, Paxton admitted to violating state securities law by not disclosing to regulators that he was receiving commissions for referring law clients to a financial planner. He paid a $1,000 fine and chalked it up as an administrative oversight.

Last year, Paxton accepted a $1,000 fine from the Texas State Securities Board for not being a registered solicitor while taking commissions for referring law clients to a financial investor. The state board declined to pursue criminal charges against Paxton, but following a complaint by the left-leaning watchdog group Texans for Public Justice, the case was revived and a judge ultimately appointed two special prosecutors.

 

More than a decade ago while he was in the legislature, Paxton voted to increase the penalty for acting as an investment adviser without registering with the state from a misdemeanor to a felony.

It passed due to a wave of securities scandals at the time, including the billion dollar fraud committed by Bernie Maddoff, who was an illegal unlicensed investment adviser.

Paxton indictment differs from Perry’s

Paxton joins former Gov. Rick Perry as the second high-ranking Texas official in the past year to be indicted while in office.

In this case, GOP leaders are silent on the attorney general’s case. It’s a sharp contrast to how conservatives rallied around Perry last year when a grand jury in liberal-leaning Austin handed up a two-count indictment against Texas’ longest-serving governor over a 2013 veto. A judge earlier this month tossed out one of the indictments, leaving only an abuse of power charge.

The cases against Paxton and Perry widely differ, including the fact that Paxton’s was investigated by the Texas Rangers.

“The Texas Rangers aren’t politically motivated in investigating the crimes they’re investigating,” said David Owens, a former Texas prosecutor who’s now a criminal defense attorney. “If you’ve got the Texas Rangers bringing forth this case, it’s serious.”

Barely seven months after becoming Texas’ top law enforcement officer, Paxton faces accusations that he misled investors in a McKinney-based tech startup before taking office, special prosecutor Kent Schaffer told The New York Times.

Schaffer did not return messages seeking comment Sunday. He and a co-special prosecutor, Brian Wice, only hinted at the indictment over the weekend in a broader statement, saying they are committed to ensuring that anyone accused of a crime is guaranteed a presumption of innocence and a fair trial.

The most serious of the allegations is that Paxton encouraged investment in Servergy Inc., which is now under investigation by the Securities and Exchange Commission. The Associated Press reported last month the connections between the startup and Paxton, who listed himself as a shareholder and whose name is among search terms that Servergy attorneys used to satisfy a federal subpoena.

Response from other politicians, agencies

“Everyone is entitled to due process under the law. As a former judge, I recognize this is the first step in a lengthy process and will respect that process as it moves forward,” said Gov. Greg Abbott in a statement.

KXAN News spoke with Craig McDonald, the founder and director of Texans for Public Justice, regarding the indictment and what would happen if Paxton resigned.

“We’re not opposed to a Republican governor picking a Republican who’s honest and straightforward as Attorney General. We’re not Democrats. We don’t work for Democrats,” said McDonald. “We actually bring complaints against Democrats and Republicans alike. I think the difference with Ken Paxton is that a grand jury believes he committed three felonies, two of them first-degree felonies. If he steps aside, we leave it to the good hands of the governor to appoint a replacement and do perhaps a better job and be a much more upstanding citizen thatn our top law enforcement officer today.”

KXAN Exclusive: Paxton discusses criminal case

 

 

The Associated Press contributed to this report.

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