Paxton Indicted on Three Felony Counts

Prosecutors confirm grand jury handed down three felony charges

Attorney General Ken Paxton, reportedly facing three felony indictments to be unsealed on Monday
Attorney General Ken Paxton, reportedly facing three felony indictments to be unsealed on Monday (Photo by John Anderson)

Expect a big crowd in the normally placid McKinney in Collin County, just north of Dallas, on Monday. That's where and when three indictments against Texas Attorney General Ken Paxton are expected to be unsealed.

Normally, Republicans would write off such charges against a statewide GOP officeholder as Democratic grandstanding. However, this comes after a long investigation by the Texas Rangers and two special prosecutors appointed by a Republican judge in one of the state's most solidly Republican jurisdictions. According to Dallas' NBC 5, the Collin County grand jury actually handed down the indictments earlier this week but the exact charges will remain unknown until Monday, when they will be unsealed.

However, Special Prosecutor Kent Schaffer gave The New York Times a brief preview. According to their reporting, Paxton will face two counts of first-degree securities fraud and one count of third-degree failure to register.

The lesser charge is old news, dating back to Paxton's time in the legislature. Moreover, he has already basically admitted to the underlying offense. In 2014, he signed an order from the Texas State Securities Board reprimanding him for violating the Texas Securities Act by making money as an unregistered investment adviser for McKinney-based Mowery Capital Management (see Branch Falls on Conflicted Paxton, May 8, 2014). Arguably, the board should have referred the case immediately to prosecutors, but instead it was left to Texans for Public Justice to file the criminal complaint with the Public Integrity Unit. While Travis County declined to prosecute (standard procedure for the office during an election cycle), the case was finally sent to Collin County, where Schaffer and Brian Wice were selected as special prosecutors.

That's what's ended up being the third degree felony. However, the other charges seem to stem from a different investigation by the U.S. Securities and Exchange Commission into Servergy, a McKinney-based server company in which Paxton is a stake holder. Court records show that the feds have been looking into the company since at least October 17, 2013, when they filed the first in a series of subpoenas against the firm. Specifically, they were investigating representations the company had made to investors about pre-orders from firms including Amazon for their servers, and their claims that they took 80% less power, cooling, or space than comparable systems. When the company refused to hand over documents, the SEC filed for a subpoena enforcement action in the U.S. District Court for the Northern District of Texas.

These cases seemed to be unrelated until earlier this year when the special prosecutors said the investigation by the Texas Rangers had taken an unexpected turn. Then, this week, Servergy founder William Mapp was seen at the Collin County Court House, and is widely thought to have appeared before the grand jury. Schaffer has now told the Times evidence suggests that, yet again, Paxton encouraged investors to put their money into the company, while failing to disclose that he was receiving a commission. Since the sum invested was so high (a reported $600,000), the charge becomes a first degree felony, with Paxton facing 5-99 years if convicted.

This may not be the end of Paxton's problems, since Lone Star Project Executive Director Matt Angle has also filed complaints with the U.S. Attorneys for Northern and Eastern Districts of Texas relating to some of Paxton's more questionable land deals. Commenting on today's news, Angle said, "Texans deserve an AG who spends his time putting lawbreakers in jail rather than one desperately trying to avoid jail time himself."

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Ken Paxton, Attorney General, Public Integrity Unit, Grand Jury, Lone Star Project, Servergy, SEC

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