Austin developer, Ken Paxton associate Nate Paul charged with 8 federal financial crimes

Nate Paul, the Austin real estate developer at the center of Texas Attorney General Ken Paxton's impeachment proceedings, made his initial appearance in federal court Friday morning to face an eight-count indictment accusing him of making false statements to secure loans in 2017 and 2018.

Paul, 36, will be released on bond Friday with conditions to ensure his appearance at future court hearings. Magistrate Judge Dustin Howell ordered Paul to surrender his passport and to not have a firearm. As per the requirements of his release, Paul cannot leave Texas unless he receives court approval but may travel unrestricted within the state.

An indictment that lays out the case against Paul does not mention Paxton nor was the attorney general brought up during Paul's 20-minute court setting. Paxton, facing his own federal investigation, is accused of misusing his office to intervene in legal matters involving Paul, who is a friend and political donor.

Paul's court appearance came a day after authorities arrested him in Austin, the culmination of a nearly four-year investigation that began in 2019 when agents raided his residence and his company. Authorities had kept tightly under wraps the specifics of the probe, though it was widely believed that investigators were looking into possible financial crimes.

Federal investigators say Paul made false statements to financial institutions in Ireland, New York,Connecticut and Texas by underreporting his total liabilities and overreporting his cash. His deceit, they say, influenced mortgage lenders' decisions to give Paul loans to buy commercial properties.

Nate Paul
Nate Paul

In one instance in March 2017, investigators say, Paul misled a credit union in Austin to secure two loans for a total of $9 million. Paul, they allege, held less than $500,000, but he represented to the credit union that he had $31 million.

On three occasions, investigators say, Paul gave a financial institution a false and counterfeit document, representing that one of his bank accounts held millions of dollars when it held less than $13,000.

Investigators are seeking forfeitures from Paul totaling $172 million — the value of the proceeds they say he obtained "directly or indirectly" from his financial misrepresentations. If convicted, Paul must also forfeit to the federal government any property obtained through a falsified loan application.

More: Austin developer Nate Paul, at center of Ken Paxton scandal, to be arraigned at 11 a.m. Friday

Paul's charges are unrelated to a separate federal investigation into Paxton over allegations that the attorney general abused his office to help Paul in numerous legal matters. That investigation, launched in late 2020 after a complaint by former aides in Paxton's office, appears to be active and ongoing. Earlier this year, the Justice Department in Washington took it over from prosecutors in San Antonio.

The Paxton-Paul connection was a partial basis for a Texas House investigation that led to Paxton’s impeachment on May 27. In exchange for Paxton's assistance in Paul's legal matters, former attorney general aides say that Paul paid to renovate Paxton's Austin home and hired a woman with whom Paxton was having an extramarital affair. Paxton, a three-term Republican, is married to state Sen. Angela Paxton, R-McKinney.

“The charges against Paul evidently have nothing to do with Attorney General Ken Paxton," said Tony Buzbee, Paxton's lawyer in the impeachment case. "Nothing whatsoever. That should speak volumes as to how weak this impeachment effort is.”

Paxton, who is suspended from office without pay after the House impeachment, is awaiting a trial in the Senate, where Paul could be called as a witness. Among the 20 articles of impeachment against Paxton is one alleging he impermissibly hired an outside lawyer to look into the FBI's actions in the 2019 raid at Paul's home and company. Paxton is also accused of wrongfully assisting Paul in a legal dispute against a local nonprofit and of trying to stall a foreclosure sale on Paul-owned properties.

Paul entered court Friday morning in handcuffs with his feet shackled and wearing Nikes, jeans and a blue shirt. He was accompanied by Austin lawyer Gerry Morris, who said he does not know who will represent Paul going forward. Morris, earlier in the investigation, represented Paul's businesses but not Paul personally.

Each count of the indictment carries a maximum penalty of up to 30 years in prison and a fine up to $1 million.

Paul grew his financial empire by betting big on Austin's commercial real estate market, and in purchasing 69 self-storage units in 11 states. In 2017, before any whiff of a federal investigation, Forbes listed his net worth at $800 million. He was just 30 at the time.

But Paul has been entangled in numerous bankruptcy proceedings and legal battles with his debtholders in recent years, and he has lost a number of high-profile properties — including the 3M campus in far Northwest Austin — as a result.

Earlier this year, a Travis County judge found Paul in contempt of court in a fraud case involving Austin nonprofit Roy F. and Joann Cole Mitte Foundation and ordered him to serve 10 days in jail. Judge Jan Soifer fined him $181,760 for violating court orders, including making illegal transfers from bank accounts — allegations that Paul denies. However, two appeals courts temporarily stayed the ruling, and Paul avoided going to jail.

This article originally appeared on Austin American-Statesman: Ken Paxton associate Nate Paul charged with federal financial crimes