INDICTMENT:
State Republican leaders deaf to calls for Paxton’s resignation
Texas Atty. Gen. Ken Paxton faces federal fraud indictment.
AUSTIN, Texas — Federal securities regulators charged Texas Attorney General Ken Paxton Monday with four counts of civil fraud, piling on more legal troubles for the Republican already under criminal indictment for allegations that he deceived friends and wealthy investors. The lawsuit filed by the U.S. Securities and Exchange Commission provoked new calls from critics that Paxton should resign but no public response from state Republican leaders, including Gov. Greg Abbott.
Paxton, who has pleaded not guilty to two felony counts of securities fraud handed up by a Texas grand jury last summer, has said he won’t step down and has faced no public pressure from state leaders to do so.
The new federal lawsuit essentially mirrors the charges in Paxton’s criminal case — that in 2011 he defrauded investors in a high-tech startup called Servergy Inc., a data server company. But a new 26-page federal court filing provides a far more detailed narrative of Paxton’s alleged misdeeds.
The SEC describes how Paxton allegedly betrayed a friend, raised $840,000 and pressured one investor to make a “hasty decision” to immediately invest, thereby increasing the value of Servergy stock that Paxton received as commission. Paxton’s investor recruiting took place when he was still a state legislator.
But both state prosecutors and now the SEC accuse Paxton of never telling investors Servergy paid him to raise money.
The investors wouldn’t have invested had they “known Paxton was being paid to promote the company,” the lawsuit reads.
Those same allegations led to Paxton’s indictment in his hometown and facing a possible sentence of five to 99 years in prison if convicted. By filing a civil lawsuit, federal regulators want Paxton to pay back “any ill-gotten gains or unjust enrichment.”
Paxton attorney Bill Mateja said he was surprised the SEC chose to file the charges a year after Paxton’s criminal indictment. “Like the criminal matter, Mr. Paxton vehemently denies the allegations in the civil lawsuit and looks forward to not only all of the facts coming out, but also to establishing his innocence in both the civil and criminal matters,” Mateja said.