Paxton Indicted

Paxton expected to plead not guilty to three felony counts

Archvillain Ken Paxton
Archvillain Ken Paxton

It's not a sentence anyone normally expects to read, but by Monday morning it had become an inevitability. Texas Attorney General Ken Paxton surrendered himself at Collin County Courthouse booking on three felony counts, and faces a potential 99 years in jail.

Word of the indictments actually leaked over the weekend, with Special Prosecutor Kent Schaffer informing The New York Times that the grand jury had actually sealed the indictments early in the previous week. Here's how the charges break down:

Two counts of first-degree securities fraud, each carrying a potential sentence of 5-99 years. Paxton is accused of illegally procuring investors for McKinney-based server company Servergy, back in 2011 when he was still a member of the Texas House. The charges state that Paxton got two people – including fellow lawmaker Rep. Byron Cook, R-Corsicana – to invest in the IT firm, without telling them that he had been paid 100,000 shares by the company for doing so. Servergy itself is embroiled in a two-year Securities and Exchange Commission investigation into allegations that it misrepresented both its products and its customer base to potential investors.

One count of failure to register with the Texas State Securities Board, a third-degree felony carrying a sentence of 2-10 years. The indictment alleges that Paxton failed to register his involvement with another McKinney-based firm, Mowery Capital Management. This may be the tougher charge for Paxton to fight off, since he has effectively admitted to the underlying offense. In 2014, he signed a letter issued by the TSSB reprimanding him for working as an unregistered investment adviser, and he has paid a $1,000 fine. Of course, Democrats are enjoying no end of schadenfreude that this offense was added to the Texas Securities Act in 2003 – Pax­ton's first session in the Texas House.

On the instruction of 396th District Judge George Gallagher, who will hear the case, Paxton was released on $35,000 bail: $15,000 for each of the first degree felonies, and $5,000 for the third count. Paxton is expected to plead not guilty.

This is just the latest stage in an investigation that has been going on for over a year. After Paxton signed the TSSB letter, watchdog group Texans for Public Justice filed a formal complaint with the Travis County District Attorney. That office declined to prosecute (standard practice when allegations are made against an officeholder during an election cycle), and so the file was passed to Collin County. After Collin County District Attorney Greg Willis recused himself because of his friendship with Paxton, seasoned defense attorneys Schaffer and Brian Wice were appointed as special prosecutors. The investigation initially seemed to center around the Mowery allegations. But in May, the court granted Schaffer and Wice an amended order, expanding the scope of their investigation after the Texas Rangers found new evidence of greater wrong-doing. That the greater scope included Servergy became clear when company founder Bill Mapp was spotted around the grand jury room by Dallas media.

Paxton's camp has been relatively quiet since the indictments were unsealed. Prior to that, Paxton's spokesman Anthony Holm repeatedly impugned the professionalism of Schaffer and Wice, and decried the whole investigation as a politically motivated witch hunt. However, since Monday, even Paxton's supporters in the GOP have been taciturn, with Gov. Greg Abbott issuing a simple and extremely cautious statement: "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."

The booking itself became immediately controversial, and not just because this is the state's top law enforcement officer being charged with three felonies. Collin Co. court watchers noted that, in violation of standing process, Paxton was not forced to wear a white towel around his neck for his mugshot. That's done to ensure all defendants look equal, but Paxton was instead photographed wearing a suit and tie. More controversial may be the fact that, even though he is under indictment, Paxton will still serve as the state's top lawyer. While the indictments sat sealed in McKin­ney, the AG vowed to back a criminal and civil investigation of Planned Parenthood during a heated legislative hearing last week surrounding doctored tapes of a PP representative discussing aborted fetal tissue (see "Hearing or Anti-Abortion Attack?" July 29). He is also widely expected to sue the federal government over the newly announced Clean Power Plan.

Since Paxton is under no legal obligation to quit, nor can he be fired, it seems these suits will continue. However, it does seem that the Republican leadership is working on a backup plan, just in case Texas needs new counsel. Respected Texas legislative journal The Quorum Report even issued a list of potential successors, including Supreme Court Justices Don Willett and Eva Guz­man, and Rep. Jason Villalba, R-Dallas.

That doesn't mean there aren't calls for Paxton's resignation. Lone Star Project Director Matt Angle, who has filed a separate federal complaint relating to some of Paxton's questionable land deals, said the attorney general will be too distracted by his own legal woes to properly execute the job. Similarly, Texans for Public Justice Director Craig McDonald, whose original complaint triggered the criminal investigation, said that "the only acceptable response to Paxton's indictment is his resignation." He added that Paxton had "abused people's faith in his public office. He has engaged in outright deception to personally profit at others' expense. These qualities make him dangerously unfit to be attorney general."

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KEYWORDS FOR THIS STORY

Kent Schaffer, Byron Cook, Mowery Capital Management, George Gallagher, Texans for Public Justice, Anthony Holm, Craig McDonald, Ken Paxton, Texas Attorney General, securities fraud, felony, Servergy, Securities and Exchange Commission, Collin County

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