Texas AG Ken Paxton's legal troubles are a campaign issue. What's behind them?
- Oops!Something went wrong.Please try again later.
AUSTIN, Texas - Attorney General Ken Paxton has been under criminal indictment for more than seven years and under investigation by the FBI for two years — legal trouble that has complicated his quest for a third term as the state's top legal officer.
Paxton also has been sued by the State Bar of Texas, which is seeking court-ordered sanctions over allegations that he misled the U.S. Supreme Court in 2020 by saying Texas had proof of significant election fraud when he sought to overturn President Joe Biden's election victory.
Paxton has dismissed the charges, accusations and State Bar lawsuit as politically motivated attacks meant to silence his voice as an influential conservative.
But three fellow Republicans, sensing vulnerability in the incumbent, targeted Paxton in this year's primaries, arguing that his legal situation should disqualify him from continuing to serve as the state's top legal officer. GOP voters disagreed, backing Paxton as he emphasized his steady stream of lawsuits against Biden's policies and his work opposing abortion, transgender rights and other liberal issues.
Next up is challenger Rochelle Garza, who also has focused on Paxton's legal woes as she attempts to become the first Texas Democrat elected to statewide office in almost 30 years.
With the Nov. 8 election looming, what are the allegations against Paxton, and how has he responded?
OnPolitics: Get political news, fast and to the point, delivered to your inbox.
Paxton accused of fraud
Paxton had barely held the attorney general's office for half a year when a grand jury in Collin County handed up indictments on two counts of securities fraud, a first-degree felony that carries a penalty of up to 99 years in prison, and one count of failing to register with state securities regulators, a third-degree felony with a maximum of 10 years in prison.
He turned himself in at the county jail in August 2015 and was arrested, photographed, booked and quickly released — but Paxton has yet to go to trial amid a series of ongoing appeals from his lawyers and prosecutors.
On the most serious charges, Paxton stands accused of violating state securities laws to defraud two members of an investment club he belonged to when, in July 2011, Paxton recommended buying shares in Servergy Inc. without disclosing that the McKinney tech company was paying him to promote its stock.
Paxton raised $840,000 for Servergy from seven investors in less than a month and received 100,000 shares, worth $1 a share, in the privately held company, according to court records.
A chunk of the money came from then-state Rep. Byron Cook, R-Corsicana, and Florida businessman Joel Hochberg, who each purchased $150,000 in Servergy stock as members of the investment club.
Complaints from Cook and Hochberg resulted in an investigation by the Texas Rangers and the indictments after appointed prosecutors presented the case to the grand jury.
SEC gets involved
An investigation by the U.S. Securities and Exchange Commission followed, leading the agency to file a federal lawsuit in 2016 accusing Paxton of fraud.
According to information in the SEC lawsuit and the indictments, the investment club required members to take the same risks and receive the same benefits on every investment, with nobody making money off of the investment of another member, but Paxton did not disclose his financial deal with Servergy, nor did he invest his own money in the company despite claiming that he had.
The SEC lawsuit, which was much more detailed than the indictments, said Paxton ignored investment club demands for information on his deal with Servergy and took other steps to conceal the company's payment.
When confronted by federal regulators, the SEC alleged, Paxton said the stock was a gift from Servergy's chairman — even though Servergy recorded the shares as payment for "services" and Paxton did not record the stock as a gift on his federal income tax form or the financial disclosure form he was required to file as a member of the Texas House. In addition, the SEC said, Paxton and Servergy's chairman had exchanged multiple emails discussing paying Paxton in cash or stock for lining up investors.
More:Dan Patrick, Ken Paxton out-raise Democratic rivals leading up to Election Day
Paxton gets a win; appeals drag on
A federal judge tossed out the SEC lawsuit in 2017, ruling that U.S. securities laws did not require Paxton to tell potential investors about his financial arrangement with Servergy.
Defense lawyers complained that state laws also don't require such disclosure, but they took another path to attack the criminal charges, arguing that they should be dismissed because the grand jury had been improperly formed.
By the time the trial judge and two appeals courts rejected that argument, 14 months had passed, and Paxton's trial was set for May 1, 2017.
In the meantime, other court fights arose, canceling the trial date.
Responding to a challenge filed by a Paxton supporter, a state appeals court in Dallas blocked Collin County from paying prosecutors who had been appointed to handle Paxton's case. That kicked off a legal fight that would take yearsto resolve in a series of appeals.
In addition, about a month before the trial date, prosecutors succeeded in moving Paxton's case to Houston, arguing that they could not get a fair trial in Collin County, which Paxton represented during 10 years in the Texas House and two years as a state senator.
One more Houston trial date would be set and canceled amid legal fights over side issues.
First, Paxton's lawyers succeeded in getting the original judge removed from the case in May 2017, leading to an unsuccessful round of appeals from prosecutors.
Then defense attorneys got the case returned to Collin County in 2020. Prosecutors appealed that ruling as well, and the all-Republican Texas Court of Criminal Appeals has yet to issue its ruling. Until that happens, no trial date can be set.
'I make no apologies'
With the securities fraud charges hanging over his head in the 2018 race, Paxton won a second four-year term by 3.6 percentage points, the closest statewide race that election cycle.
With those charges still unresolved, Paxton heads into this next election with a new problem — allegations of official misconduct leveled by eight of his top lieutenants at the Texas attorney general's office, all of whom have since been fired or resigned.
In fall 2020, the agency officials told the FBI and the Texas Rangers that they believed Paxton had accepted bribes, tampered with government records, obstructed justice and misused the powers of his office to help his friend and benefactor Nate Paul, an Austin real estate investor.
Paxton dismissed the allegations as coming from "rogue employees" bent on undermining efforts to investigate Paul's serious claim that federal agents and others had illegally searched his Austin home and businesses in August 2019.
"I make no apologies for being a fierce investigator and defender of individual rights in the face of potentially unreasonable and authoritarian actions," Paxton said in November 2020.
More:Texas AG Ken Paxton to appeal judge's order to testify in abortion case
FBI gets involved
The FBI launched an investigation into the allegations but has declined to discuss its probe, so most of the public knowledge of the allegations against Paxton comes from a whistleblower lawsuit by four former executives who claim they were improperly fired from the attorney general's office in retaliation for taking their concerns to law enforcement.
The lawsuit, which Paxton has asked the Texas Supreme Court to toss out, concentrates on four central allegations:
Paxton improperly intervened in a dispute over open records to help Paul gain access to investigative documents related to the searches of Paul's home and businesses, the lawsuit claims. Paxton had never before gotten personally involved in his agency's decisions involving the state's open records laws, the filing says, adding that Paxton's actions "threatened to interfere with and obstruct the FBI."
Paxton, overriding a decision by his agency's Charitable Trust Division, directed the attorney general's office to intervene in a Mitte Foundation lawsuit against Paul. "It was odd," the whistleblowers wrote, "considering that (Paxton) had never done so before or even shown any interest in a charity case."
Paxton pressed to have a written opinion published at 2 a.m. on a Sunday stating that COVID-19 safety rules required foreclosure sales to be suspended. That rushed opinion, contrary to Paxton's opposition to every other government restriction on pandemic gatherings, allowed Paul to delay a foreclosure sale for at least one of his properties two days later, the lawsuit alleges.
The whistleblowers also accused Paxton of "personally orchestrating" an attorney general's office investigation into Paul's claims of an improper search. When two agency executives found Paul's claims to be without merit, "Paxton took over" and ensured that an outside counsel would be hired to resume the investigation, the lawsuit says. Paxton went outside normal procedures to hire as outside counsel "someone he could direct and control: Brandon Cammack, a five-year lawyer with no law-enforcement or investigative experience," the filing says.
The fired executives alleged that in return, Paul paid to remodel Paxton's home, employed Paxton's mistress and gave Paxton a $25,000 political donation.
Sued over election fraud claims
The State Bar's Commission for Lawyer Discipline sued Paxton in April, saying he violated state ethical standards that prohibit lawyers from acting with dishonesty, fraud, deceit or misrepresentation when he asked the U.S. Supreme Court to overturn Biden's election victories in four swing states.
Seeking a judgment of professional misconduct against the state government's top lawyer, the commission said Paxton was dishonest when he told the court that Texas had uncovered substantial evidence of voter fraud — relying on allegations that had already been proved wrong or dismissed and rejected by other courts.
In September, however, a state judge dismissed a similar lawsuit against Paxton's second-in-command, Brent Webster, ruling that it improperly infringed on the attorney general's power to file lawsuits on the state's behalf.
The commission has appealed that ruling, but Paxton is pressing to have the lawsuit dismissed on similar grounds in a separate court.
This article originally appeared on Austin American-Statesman: Texas AG Ken Paxton's legal troubles are a 2022 campaign issue
