Wednesday, July 8, 2015

Investigation of Texas Attorney General Paxton Going To Grand Jury

UPDATED - Wednesday, July 8, 2015 1:30 PM - Texas Tribune Reports:
The name of Attorney General Ken Paxton, facing potential indictment by special prosecutors in Collin County for first-degree felony securities fraud, has surfaced in a federal probe of a company in which he is an investor.

The investigation, first reported late Tuesday by The Associated Press, centers on whether McKinney-based Servergy defrauded investors with false claims about the sales of its data servers and their technological capabilities. According to court filings by the U.S. Securities and Exchange Commission, the company is suspected of "potential misstatements" about having pre-orders for the servers from the online retailer Amazon and the semiconductor giant Freescale — and in assertions that the product needed up to 80 percent less cooling, energy and space compared with other servers on the market.

Paxton's email address appears with about 70 other contacts in one list of search terms in a subpoena of Servergy from the SEC. His name is also included in an October 2014 letter from Servergy to the SEC describing the search terms used to produce the documents the company turned over in response to a subpoena.

Texas Public Radio -  MP3 - Tx AG Paxton’s Legal Challenges Grow
Original Post Thursday, July 2, 2015 2:00 AM

WFAA 8 News Dallas reports Texas Attorney General Paxton faces first-degree felony indictment.
The criminal investigation against Republican Texas Attorney General Ken Paxton has taken a more serious turn, with special prosecutors now planning to present a first-degree felony securities fraud case against him to a Collin County grand jury, News 8 has learned.

Special prosecutor Kent Schaffer told News 8 Wednesday afternoon that the Texas Rangers uncovered new evidence during the investigation that led to the securities fraud allegations against the sitting attorney general.

“The Rangers went out to investigate one thing, and they came back with information on something else,” Schaffer told News 8. “It’s turned into something different than when they started.”

Schaffer, a Houston criminal defense attorney, said the securities fraud allegations involve amounts well in excess of $100,000. He declined to comment specifics of the fraud allegations.

A first-degree felony conviction is punishable by up to life in prison.
From January 2013 until January 2015, Paxton represented Collin County in the Texas Senate, District 8, which includes most of the city of Plano in Collin County, and parts of surrounding Collin County cities, including Allen, Frisco, and McKinney. From 2003 to 2013, he represented Collin County in the Texas House of Representatives, District 70. Paxton practiced law in his McKinney law office during the years he served in the state legislature.

Last July, Texans for Public Justice filed a formal complaint with the Travis County District Attorney, seeking to determine if there was evidence to charge Ken Paxton with state securities law violations.

Early this year, the investigation by the Travis County DA’s State Public Integrity Unit into charges of securities law violations by Ken Paxton during the years he practiced law in McKinney was passed to Collin County District Attorney Greg Willis after Travis County DA Rosemary Lehmberg concluded her office lacked jurisdiction over the case. “Any conduct that might constitute an offense occurred outside of Travis County, and venue for any further investigation would be in the county where the conduct occurred,” Lehmberg said in a statement.

Willis asked the Texas Rangers to begin investigating whether his old friend and former business partner Paxton should be criminally prosecuted for violating state securities laws, and then he recused himself from further involvement. In a motion filed in a Collin County District Court, Willis asked District Judge Scott Becker to appoint a criminal district attorney pro tem to lead the investigation.
"Normally any recusal considerations are prompted after a law enforcement agency’s submission of an investigated case to our office. This has not happened," Willis wrote. "Nevertheless, now that an investigative agency has been tasked to investigate this matter, and to avoid any potential appearance of impropriety arising from his business and personal relationship with Ken Paxton, the undersigned Criminal District Attorney of Collin County respectfully requests this Honorable Court to appoint a Criminal District Attorney Pro Tem of Collin County in this matter."
Judge Becker granted that request, ensuring Willis will not be involved in any potential prosecution of his old friend and former business partner. Judge Becker appointed Kent Schaffer and Brian Wice to serve as criminal district attorneys pro tem.

While investigating allegations of securities fraud against Paxton, Schaffer and Wice found sufficient evidence of a first-degree felony securities fraud to present to a grand jury. WFAA 8 News:
Schaffer said he and the other special prosecutor will begin presenting their case to a Collin County grand jury within the next few weeks. He said he anticipates eight to nine witnesses will appear before the grand jury.

“We believe that there’s sufficient evidence to present to a grand jury,” Schaffer said.

Schaffer said he also anticipates presenting a case involving failing to register, which is a third-degree felony.

The investigation had started with allegations that Paxton violated the law when he failed to register as an investment advisor with the state.

News 8 also learned Wednesday that Paxton had hired a former federal district judge.

“I met with General Paxton and he had retained me to look into the matter,” said Joe Kendall, who practices in Dallas. “I am honored that he did. He’s a good man.”

Kendall told News 8 that he met with Paxton “very recently” in Dallas and confirmed that he was hired within the past two days.

“I’m going to be helping look into the matter,” Kendall said, declining to comment further.
Paxton admitted last year to soliciting investment clients for another friend and business partner without properly registering with the state. He was reprimanded and fined $1,000 by the State Securities Board. Otherwise, Paxton aggressively denies any serious wrong-doing.
“This appears to be a politically motivated effort to ruin the career of a longtime public servant,” Paxton spokesman Anthony Holm said in a statement that also accused the two attorneys of building their case in the press. “These attacks on Ken Paxton appear to have become a political hit-job in the media, perhaps having the effect of inappropriately influencing the grand jury.”
Claiming the WFAA 8 News report of special prosecutors saying they've found evidence of first-degree felony securities fraud sufficient enough to take to a grand jury is a “hit job” seems extreme. Extreme because the allegations against Paxton are being investigated by the Texas Rangers, a part of Republican dominated state government, in one of the most Republican counties in Texas, by special prosecutors appointed by a Collin County Republican District Judge who is also a friend of Paxton.

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