Texas Attorney General Surrenders to Charges of Securities Fraud

McKINNEY, Texas – Texas Attorney General Ken Paxton surrendered himself to officials at the Collin County Jail today and was booked on three felony charges for his role in defrauding two individuals for more than $100,000.

In a USA Today article, “Texas attorney charged with securities fraud,” the reporters state that the Republican attorney general went through the process of getting fingerprinted and photographed before being released on personal recognizance bonds of $35,000.

Paxton, 52, who was sworn into office on January 1 of this year, is charged with two first-degree felonies for securities fraud, and faces a third-degree felony for failing to register with the state of Texas to sell securities. The indictments relate to alleged conduct that occurred while the attorney general served in the state legislature.

The article also states the first-degree felony charges are related to Severgy, a McKinney-based company the Securities and Exchange Commission has been investigating for some time. As for the third charge, Paxton referred clients to his friend and campaign donor Fritz Mowery, a McKinney investment adviser, and failed to tell them he received hefty commissions for the referrals.

Last month, special prosecutor Kent Shaffer stated the Texas Rangers had uncovered new evidence, and the securities fraud allegations involved losses in excess of $100,000. Schaffer declined to reveal specifics, however.

“The Rangers went out to investigate one thing, and they came back with information on something else,” Shaffer said to reporters in July. “It’s turned into something different than when they started.”

Paxton’s state filings show he owns at least 10,000 shares of Severgy. His name also appears as a search term in SEC filings accusing Severgy of misleading investors.

The article claims that in the court records filed in December 2014, the SEC noted it was conducting an ongoing investigation into the company for possible fraudulent statements and/or omissions related to Severgy’s technology and business relationships. The filing accused the company of lying to investors about having pre-orders from companies, including Amazon.

Although the first-degree securities indictments carry a potential penalty of up to 99 years in prison, and the third-degree charge carries a maximum sentence of 10 years in prison, Paxton can continue to work just as Texas Gov. Rick Perry did after his two felony indictments in August 2014. If convicted, however, Paxton could lose his law license and have to step down from his position as attorney general, the article notes.

The Republican Party of Texas, in a statement issued earlier today, asked Texans to allow Paxton to let the law decide his guilt or innocence.

“There’s a reason why Texans have warily observed this news, said Aaron Whitehead, the party’s communication director. “Some of the outrageous events surrounding this sloppy process certainly do not typify the level of quality that Texans expect from our judicial system.”

According to the article, Whitehead also said Paxton, who was overwhelmingly elected by Texas voters, has done a lot for the state. He has helped in the arrest of child predators, investigated the “odious” acts of Planned Parenthood, and pushed back against the federal government.

“We expect him to fight these allegations with that same zeal, “Whitehead said. “Ken Paxton, like all Americans, deserves to have his say in a court of law, rather than be judged in a court of public opinion that is presided over by liberal interest groups.”

Sources:

Whitely, Jason and Tanya Eiserer. “Texas attorney general charged with securities fraud”. USA Today