Ex-Paxton prosecutor: Deal ‘sends a signal’
The deal announced Tuesday in Ken Paxton’s securities fraud case brought one of the longest-running cases in Texas history to an abrupt end just weeks before it was to go to trial. But the case had long been touch-and-go, according to lawyers who worked on it.
Paxton was accused in 2015 of persuading two friends to buy more than $100,000 worth of stock in Servergy, a McKinney technology company, without disclosing that he was being compensated by the company and was not an investor himself. He agreed to perform 100 hours of community service and pay $300,000 in restitution to have the charges dropped.
Special prosecutors assigned to the case said years-long procedural delays made it especially hard to win at trial. One of the alleged victims died while the case was ongoing.
“Criminal cases aren’t like fine wine,” said special prosecutor Brian Wice. “They do not get better with age.”
The case was “makeable,” said Kent Schaffer, who withdrew from the prosecution last month, but he and Wice estimated their odds of winning had been about 50-50. That’s why Schaffer said he resurfaced a discussion about a deal with the defense six weeks ago, just before he left.
In recent weeks, Wice and his new co-counsel, Jed Silverman, had narrowed their focus to two more severe felony charges after a key witness, appeared ready to side with Paxton on a third, which accused him of failing to register as an investment adviser.
Wice said they started reading interviews and re-interviewing nearly a dozen witnesses last month, some of whom “hadn’t been interviewed since the Obama administration.”
“As a result of that intensive interviewing and re-interviewing process, we had a sense of what these cases were — more importantly, what they weren’t,” Wice said.
The key witness, Paxton’s former friend and business associate Frederick “Fritz” Mowery,had already testified a decade ago to the Texas State Securities Board that he was the one who erred in not registering Paxton as a security adviser. Following a 2014 investigation, the board reprimanded Paxton and fined him $1,000 for the violation.
Wice acknowledged that testimony was technically public record but said they didn’t learn of the details until a month ago when Silverman reinterviewed the witness. Silverman said the interview elicited a “level of detail that would make it considerably harder for a jury to believe” Paxton knowingly broke the law.
Clear path to justice
Silverman and Wice described in interviews how the investment-related charges had a clear victim and a clear path to justice, unlike the registration charge, which Silverman described as “really an administrative matter.”
Silverman said the victims told prosecutors their top priority was being made whole financially, and as lawyers, they were obligated to take that to heart.
Schaffer said most of the witnesses in the case were hostile to the prosecution and friendly with Paxton. He said the prosecution planned to show in court that Paxton had excelled in a securities course when he was licensed as proof that he should have known better.
Still, he said, there was no knowing if a jury might take pity on Paxton — that they would know he’s guilty but decide that the punishment doesn’t fit the crime.
“To not fill a form out from the state because you thought your federal form was sufficient? And it was (sufficient) up until three months ago?” Schaffer said. “You know, some jurors may feel kind of like look, nobody got harmed. You didn’t do it correctly. He did pay a civil penalty. He’s been punished enough.”
Schaffer added that the charge accusing Paxton of misleading investors might also have been difficult to prove because the law isn’t “crystal clear” about what a person soliciting investments is supposed to tell a potential investor, and Paxton allegedly didn’t lie outright, he lied by omission.
In his view, pretrial diversion was a way prosecutors could make sure there were some guaranteed consequences for Paxton, and it also implied guilt.
“It sends a signal to anybody who is paying attention that this guy obviously did what he’s accused of doing or he wouldn’t be entering into that agreement,” Schaffer said.
Pay dispute
Paxton’s attorney, Dan Cogdell, said he always considered the failure to register charge as “bulls- - -,” in part because Paxton had previously paid a state fine for it.
“I’ve never been in a situation where an individual who agreed to pay the fine to the Texas State Securities Board was turned around and prosecuted criminally,” he said. “The only reason it happened, in my view, was because Paxton was attorney general.”
Schaffer ultimately backed out of the case after Wice refused to make a deal and Harris County state district court Judge Andrea Beall decided the trial could move forward even though a dispute was not yet resolved over how much the special prosecutors would be paid.
Late last year, Beall ordered Collin County to pay Wice and Schaffer tens of thousands of dollars after the county argued that their work was subject to a pretrial work cap that would have paid them a rate around the minimum wage in Texas.
Those rates are “wholly unreasonable for … a case of this complexity,” Beall wrote in November. The case was so complicated that three prosecutors were originally appointed, she added, an amount typically reserved for death penalty cases. (The third prosecutor dropped out of the case before Schaffer did.)
Collin County has continued to fight the order.
“Without sounding too mercenary, there came a time that it dawned on me that I’m not the one who should be financing the prosecution of Ken Paxton,” Schaffer said. “I’ll do pro bono cases for widows, orphans, poor people being taken advantage of by the system. But I’m not going to go after some politician and spend tons of money to punish him. That’s not my job.”
Silverman said Tuesday he would refuse a paycheck for his work on the case. “I didn’t do it for the money,” he said. “I did it because I felt like it needed to be done.”
‘Both sides at fault’
Combined with his concerns about the prosecution’s odds at trial, Wice said Tuesday that he changed his mind about the deal because it would bring justice to the victims, and his obligation was always to find a fair resolution, not necessarily to convict Paxton.
Cogdell said he and Paxton were always open to pretrial diversion, and that the restitution payment just made financial sense — it would have cost Paxton more to pay defense attorneys for going to trial.
“You could make the argument that we should have done it nine years ago,” Cogdell said of reaching a deal, adding he’s never had a case last this long — longer than the Beatles were together, he joked.
“Both sides are at fault, to some extent, in terms of this case being in orbit for nine years,” he said. “From our perspective, from Paxton’s perspective particularly, he’s just glad to get it resolved and have it behind him. This has been a huge albatross at his neck.”
Meanwhile, Schaffer and Wice said it hadn’t escaped their mind that Paxton could face federal charges if a federal grand jury, which is reportedly investigating the same corruption claims that spurred Paxton’s impeachment last year, votes to indict him.
“If he’s convicted in state court, the odds are the jury is gonna give him probation,” Schaffer recalled thinking. “They’re not going to put a first offender in prison for failing to fill out the form. But the feds will (for the separate corruption allegations). They could put him away for four, five, six years, and he’ll have to do the time.”
Schaffer said he doesn’t have direct knowledge of the status of the federal probe, but said: “If they’re taking that long to present evidence to a grand jury, it’s because they have a case, not because they don’t have a case.”