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Monday, October 24, 2016

The Feds Aren't Done With Ken Paxton

Posted By on Mon, Oct 24, 2016 at 7:55 AM

click to enlarge Texas Attorney General Ken Paxton was booked on three felony counts last summer.
  • Texas Attorney General Ken Paxton was booked on three felony counts last summer.
October has been another rocky month for Texas Attorney General Ken Paxton who, for most of his first term in statewide office, has fought felony fraud charges and a civil case by the U.S. Securities and Exchange Commission over allegations he duped investors into dumping money into a probably bogus north Texas tech firm without disclosing that he was being compensated for his recruiting efforts.

This month, the state's highest criminal court rejected Paxton's last crack at dismissing the charges against him, all but ensuring a criminal trial featuring the state's top law enforcement official. Then, last week, we got news of an actual conspiracy to mess with Paxton's prosecution when the Dallas Morning News' Lauren McGaughy unearthed a series of text messages from Paxton's north Texas lawmaker buddies discussing how to pressure a county judge to stop paying the special prosecutors on the case – which would be a violation of a court order. 

The one bright spot for Paxton, however, had been the SEC case against him, which a federal district court judge dismissed earlier this month, saying Paxton had no legal obligation to tell investors he'd be paid a commission for soliciting their money. But clearly the feds aren't done with Paxton. On Friday, just before their deadline to refile civil charges, the SEC filed an amended complaint that doubles down on its case against the Texas AG. 

The new filing claims that the group of investors Paxton convinced to dump money into a tech start-up called Servergy (which, according to the feds, also lied to investors about both its client list and even the very servers it was hawking), "reasonably expected" Paxton to disclose the kickback he was getting for their investments.

According to the SEC filing, the people in that investors group even had an understanding that "no one member makes money or otherwise benefits off of the investment of another member." It's not just that Paxton failed to mention his commission, the SEC claims; rather, he "actively concealed" it by leaving it out of his filings with the Texas Ethics Commission and the IRS, rebuffed the investors efforts to find out about his ties to Servergy, and, when asked about it by the SEC, claimed the commission he got from the company was simply a gift.

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