Paxton seeks 2nd dismissal of SEC fraud case
AUSTIN — Attorney General Ken Paxton on Friday asked a judge to dismiss for a second time the federal government’s securities fraud case against him, as his attorneys argued that charges revived last month by prosecutors remain meritless.
The U.S. Securities and Exchange Commission’s amended complaint “has not cured any of the deficiencies the court found in its original complaint,” Paxton’s attorneys told U.S. District Judge Amos Mazzant in their motion.
In October, the judge threw out the SEC’s charges against Paxton but invited the agency to revise its complaint against the first-term attorney general. At the time, Mazzant said the agency failed to prove that Paxton lied or had any obligation to disclose to potential Servergy investors that he was compensated if they bought company stock.
“Our motion to dismiss filed today explains why the SEC’s new complaint fares no better,” said Matthew Martens, Paxton’s lead attorney on the case. “The reason is simple: Mr. Paxton did not commit securities fraud.”
The SEC case alleges that Paxton in 2011, then a state representative, never revealed that he received 100,000 shares of tech company Servergy’s stock, priced at $1 per share, in exchange for bringing in about $850,000 in investments. Paxton long has denied any wrongdoing and his attorneys have said he was under no obligation to disclose his commission to potential investors.
In response to Mazzant’s order, the SEC on Oct. 21 filed amended charges that included new details, according to the agency, about an investors’ group he joined before 2011 in which members were made aware that “no one member makes money or otherwise benefits off the investment of another member.” The revised complaint also alleged that Paxton’s “actions demonstrate that he knew this information would be of crucial importance to the members of his investment group and others and would materially affect decisions to invest in Servergy.”
Paxton’s legal team on Friday dismissed the SEC’s additions.
“At this stage, both Paxton and the court must assume that this belated allegation is true,” the filing read. “But this newly-minted allegation does nothing to rescue the SEC’s case from its still fundamental flaw — namely, the absence of any legally cognizable duty to disclose.”
Bill Mateja, another Paxton attorney, added Friday: “The SEC’s ‘do-over’ illustrates the weakness of its case and begs the question: if their new information is so significant, why are we now just hearing about it?”