Texas AG Ken Paxton Agrees To Community Service, Paying Restitution To Avoid Trial In Securities Fraud Case

Prosecutors on Tuesday agreed to drop the securities fraud charges facing Attorney General Ken Paxton if he performs 100 hours of community service and fulfills other conditions of a pretrial agreement, bringing an abrupt end to the nearly nine-year-old felony case that has loomed over the embattled Republican since his early days in office.

The deal, which landed three weeks before Paxton is set to face trial, also requires him to take 15 hours of legal ethics courses and pay restitution to those he is accused of defrauding more than a decade ago when he allegedly solicited investors in a McKinney technology company without disclosing that the firm was paying him to promote its stock. The amount of restitution totals about $271,000, prosecutor Brian Wice said.

[Legal experts say it’s rare to pursue jail time in securities fraud cases like Paxton’s]

Paxton, who will not have to enter a plea under the terms of the agreement, faced the prospect of decades in prison if he had been convicted of fraud. His status as a felon, based in part on an opinion he issued himself, would have likely barred him from running for office in the future.

Paxton attorney Dan Cogdell said the prosecutors “approached us” and Paxton was “happy to agree to the terms of the dismissal.”

“But let me be clear, at no time was he going to enter any plea bargain agreement or admit to conduct that simply did not occur,” Cogdell said in a statement. “There is no admission of any wrongdoing on Ken’s part in the agreement because there was no wrongdoing on his part.”

Ken Paxton’s attorney, Dan Cogdell, speaks with the press following the news that prosecutors agreed to dismiss securities fraud charges against Paxton. This resolves a nearly nine-year-old case that has shadowed the Republican attorney general since he took office. Credit: Jasper Scherer / The Texas Tribune

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The deal is the second major win for Paxton in roughly the last six months, after the Republican-controlled Texas Senate acquitted him last fall of 16 impeachment charges centered on allegations that he accepted bribes and abused the authority of his office to help a wealthy friend and campaign donor.

Still, Paxton’s legal troubles aren’t over. His agency continues to face a lawsuit brought by four former top deputies who argue that Paxton improperly fired them in 2020 for reporting him to the FBI. Those whistleblowers told law enforcement they believed Paxton was using his office to benefit Austin real estate mogul Nate Paul — the charges that formed the basis for Paxton’s impeachment last year and that are the subject of an ongoing federal investigation. He has denied all wrongdoing.

The securities fraud case, meanwhile, has been repeatedly delayed by disputes over where the trial should take place and how much the special prosecutors handling the case should be paid. The legal saga dates back to July 2015, when Paxton was indicted on three felony securities fraud charges just months into his first term as the state’s top lawyer.

Paxton said he and his family are “relieved to finally have a resolution” to a matter that has caused them “ongoing stress” for around a decade.

“There will never be a conviction in this case nor am I guilty,” Paxton said in a statement Tuesday, calling the case a “political prosecution.”

Two of the charges — first-degree felonies — stemmed from allegations that Paxton persuaded investors, including a then-GOP state lawmaker, to buy at least $100,000 worth of stock in a tech startup, Servergy, without disclosing that he would be compensated for it. Paxton will have 18 months, the length of the pretrial deal period, to pay restitution to the former lawmaker, Byron Cook, and the estate of Joel Hochberg, a Florida businessman who died last year.

Wice said he is “not necessarily opposed” to dropping the charges before the 18 months are up if Paxton makes the payments sooner. He said Paxton cannot use campaign funds to pay restitution.

Paxton was also accused of steering clients to a friend’s investment advising business without registering with the state securities board, a third-degree felony.

He has maintained his innocence and framed the case as a politically motivated witch hunt.

“This case has been pending longer than The Beatles were together. Literally. It’s been nine years and today marks the end of what in our opinion should have happened a long time ago,” Cogdell told reporters.

The terms were revealed at a brief hearing Tuesday morning before Harris County state District Judge Andrea Beall. Paxton, who attended the proceedings, betrayed little emotion and spoke only to be sworn in and confirm that he agreed to the deal.

Wice said he had been “besieged by a torrent of phone calls” from people who have “expressed their monumental displeasure with the fact that these cases are being resolved with a pretrial intervention.” Touting the restitution Paxton now owes to his alleged victims, Wice said it was more important to secure justice for them than to pursue prison time for Paxton, which he said should only be a priority if the defendant poses a threat to public safety.

“I appreciate your concern,” Wice said of those criticizing the outcome. “With all due respect, your truth is not the truth. You know one half of 1 percent of what [fellow prosecutor] Mr. [Jed] Silverman and I know about the facts of these cases. And the fact that all of these people have registered their monumental displeasure with what happened in these cases, I submit, probably should have been directed at the ballot box.”

Paxton will perform community service in Collin County, where he resides, with an “entity or organization” agreed upon by both sides, Wice said — likely a “food pantry or soup kitchen.”

He will also be required to check in with prosecutors every 60 days to ensure he is fulfilling the terms of the deal. The case could still resume and head to trial if Paxton fails to comply.

The fraud case began moving toward trial in November when Beall declined to continue holding it up over a dispute about back pay owed to the special prosecutors.

The Texas Court of Criminal Appeals also declined to take up the pay issue, and Beall rejected Paxton’s attempt to toss the case last month, seeming to set the stage for an April 15 trial.

Wice said the case included a “perfect storm of everything that could have derailed and delayed the prosecution.” He slammed the judges who previously oversaw the case before Beall took it over, accusing them of failing to issue timely rulings on basic motions.

The outcome marks the latest example of Paxton emerging from scandal virtually unscathed, a trend that has baffled and enraged his critics and reinforced his status as a hero of the party’s most conservative flank in Texas and beyond. He has deflected scandal repeatedly, twice winning reelection while under indictment for securities fraud and, in the most recent election, after being accused of corruption by former top deputies.

The pretrial agreement also means that Paxton will again avoid facing questions under oath. He did not testify at his impeachment trial after Lt. Gov. Dan Patrick — who presided over the case in a role akin to that of a judge — ruled that Paxton could not be forced to do so. He was also spared from being deposed in the ongoing whistleblower lawsuit earlier this year when the Texas Supreme Court blocked depositions for Paxton and three top aides days before they were scheduled to begin.

Wice noted, however, that Paxton could have invoked his right under the Fifth Amendment to avoid testifying even if the securities fraud case had proceeded to trial.

Paxton, who spent a largely uneventful decade in the state House, rose to political prominence based in part on his reputation as a stalwart backer of religious liberty who would use the attorney general’s office to wage major legal battles on issues like abortion and LGBTQ rights. He has frequently sued the Biden administration on an array of policies, most notably around immigration. He also tried to overturn the results of the 2020 election in four key battleground states won by President Joe Biden, an unsuccessful bid that nonetheless cemented Paxton’s political alliance with former President Donald Trump. That effort prompted the Texas State Bar to sue Paxton for professional misconduct, in a case that is still ongoing.

Trump has repeatedly come to Paxton’s defense and encouraged his legions of followers to target those who have opposed Paxton, including House GOP lawmakers who voted to impeach the attorney general.

The result clears a major hurdle for Paxton’s political future. He is widely seen as a likely candidate for higher statewide office and has pointedly refused to rule out the possibility of challenging U.S. Sen. John Cornyn in the 2026 Republican primary.

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This article originally appeared in The Texas Tribune at https://www.texastribune.org/2024/03/25/ken-paxton-plea-deal-securities-fraud-felony/.

The Texas Tribune is a member-supported, nonpartisan newsroom informing and engaging Texans on state politics and policy. Learn more at texastribune.org.

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