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Texas Attorney General Ken Paxton cuts deal to have fraud charges dropped, trial canceled

Attorney General Ken Paxton at the Texas Republican Party's convention in San Antonio in 2018.
Julia Reihs
/
KUT News
Texas Attorney General Ken Paxton, shown at the Republican Party of Texas convention in San Antonio in 2018, has cut a deal to have the securities fraud charges filed against him dropped.

In a stunning decision announced just weeks before he was scheduled to face a jury, Texas Attorney General Ken Paxton has reached a deal with prosecutors to have the felony securities fraud charges against him dropped and his trial canceled.

The terms of the deal were announced on Tuesday morning during a court hearing in Houston. Paxton must complete 100 hours of community service, take 15 hours of legal ethics courses and pay around $270,000 in restitution to his accusers.

If he fulfills the terms within 18 months, his charges will be dismissed. If not, a new trial date will be set and Paxton will face a jury.

Paxton is not admitting guilt by agreeing to the deal.

He said just one word in court Tuesday: "Yes," an acknowledgement that he was aware of and agreed to the terms. Donning a blue-gray suit and salmon pink tie, Paxton appeared calm in court. He leaned back casually while the terms were read aloud.

The announcement marks a major win for Paxton, 61, his lawyers said after the hearing. He can now put behind him the legal cloud that has darkened the entirety of his tenure as attorney general.

"It was a case on Day One we knew they couldn't prove, and on year nine we still knew they couldn't prove. Ken's not guilty," Paxton's lawyer, Dan Cogdell, said.

Later Tuesday, Paxton said the following via an emailed statement: “I am grateful to reach this agreement, to get this matter behind me, so I can get back to the work representing the State of Texas.”

Indicted just months after he took office in 2015, Paxton was accused of failing to tell investors in a McKinney technology firm that he had a financial interest in the company before getting them to buy in.

He also did not register with the state before soliciting clients for a friend’s investment firm, for which he paid a fine in 2014. Paxton was charged with one third-degree and two first-degree felonies.

This deal keeps him in office — and out of state prison. If Paxton had been tried and convicted, he would have faced decades behind bars and tens of thousands of dollars in fines, as well as removal from his job as the state’s top lawyer.

The announcement Tuesday, made less than a month before the April 15 trial, also raises questions about why the prosecutors continued to pursue the case for so long only to make a deal.

Now, after nearly nine years, the saga comes to a close without a trial. It ends not with a bang, but a whimper.

That the case took this long to reach a trial date is unusual. Some delays were due to acts of God, others manmade, from hurricanes to a protracted fight over the prosecutors’ pay rate.

The case the prosecutors adamantly pursued against Paxton shook up political and legal circles in Texas, making ripples far beyond its limited scope. It spun off local fights and federal suits. It even ushered in new state laws.

Lead prosecutor Brian Wice spoke with the press for more than 30 minutes after the announcement.

He said it was unfair to criticize the deal, saying justice was served because Paxton agreed to pay his accusers. The agreement was made now, and not sometime in the last nine years, he added, because the case was wrapped up in appeals.

"Ultimately, this was a resolution that required him, whether inferentially or indirectly, to accept responsibility," Wice said.

Asked how this could be seen as anything but a loss for the prosecution, Wice told the media: "I'm not going to concern myself an iota as to who wins. Our oath that we took — and maybe you weren't listening — was our primary duty is to do justice and not to convict. So the question isn't whether or not who won, but was justice served? And I think the answer was unmistakably, 'yes.'"

Paxton weathered a half dozen other scandals while this case was playing out. So far, he’s beaten them all. The most serious — allegations of official corruption that resulted in his impeachment last yearended in his acquittal.

Despite his legal troubles, or perhaps in part because of them, Paxton has remained popular with Texas voters. Maintaining his innocence in the face of what he’s called partisan attacks, he has instead focused on pursuing an agenda that is unabashedly anti-abortion, anti-LGBTQ and anti-immigrant rights.

In November 2022, he won re-election to a third term by a nearly 10-point margin.

Putting his securities fraud case behind him is likely to further embolden Paxton. A close ally of Donald Trump, Paxton could use the win as a springboard to higher state or federal office.

But Paxton hasn’t completely cleared his legal troubles. He is still under FBI investigation for the same corruption allegations that led to his impeachment, and he is being sued for wrongful termination by the ex-staff members who first raised these accusations.

Paxton also faces a lawsuit filed by a disciplinary committee of the State Bar of Texas for his role in challenging the results of the 2020 presidential election.

Asked on Tuesday, neither Paxton’s lawyers nor the prosecutors said they had any update on the federal case.

What was Paxton accused of doing?

Paxton’s alleged crimes dated back to his time in the Texas House.

A fellow GOP legislator named Byron Cook and Joel Hochberg, a wealthy videogame developer from Florida, accused Paxton of defrauding them in 2011. They said Paxton got them to invest in Servergy, Inc., a tech startup, without disclosing that its CEO had been given Paxton free stock.

Paxton said he’d wanted to invest in the company but its CEO refused, telling him in a McKinney Dairy Queen that “God doesn't want me to take your money,” according to federal fraud charges filed in 2016. The federal charges were later tossed.

Paxton was also paid to send clients to a friend’s fraught investment advisory firm without properly registering with the state. He signed a disciplinary order to this effect in 2014 and paid a $1,000 fine. He said this mistake was merely an administrative oversight.

In summer 2015, a Collin County grand jury indicted Paxton for multiple felonies. He was booked and released on bond.

Paxton pleaded not guilty. He said the allegations were nothing more than attacks from enemies within his own political party.

Why did it take so long to close this case?

Normally, a case like this would be handled by the local prosecutor in the county where the alleged crimes took place. But Collin County District Attorney Greg Willis recused himself due to his longtime friendship with Paxton.

Two private criminal defense attorneys from Houston, Wice and Kent Schaffer, were brought on to prosecute the case in Willis’ place. Their appointment as special prosecutors was controversial.

Collin County is on the hook to fund the prosecution because that’s where the alleged crimes took place.

But after cutting a six-figure check in 2016, the commissioners court in Collin County refused to pay Wice and Schaffer again. They said their hourly rate exceeded what was allowed under state law. The county sued and won.

The prosecutors still haven’t been paid. In January, the state’s highest criminal court refused to force Collin County to pony up the money.

Legislators also balked over Wice and Schaffer’s appointment. In response, they passed a new law in 2019 requiring only district or county attorneys to be able to represent the state in cases like this.

The special prosecutors further delayed the case by fighting for the trial to be held in Harris instead of Collin County. They argued they couldn’t get a fair trial in McKinney, where Paxton had lived and worked for decades.

For their part, Paxton’s lawyers delayed the trial by having several judges removed from the case. Four judges ultimately presided over the case. The case was delayed even further by Hurricane Harvey, which caused court backlogs in Houston.

Last month, Paxton tried one final time to have the case thrown out, arguing his rights to a speedy trial were violated. The presiding judge rejected the attempt.

At that same hearing, Schaffer resigned his role as prosecutor. He said he had wanted to make a deal with Paxton’s attorneys but blamed Wice for scuttling it. Wice then brought on Jed Silverman, another Houston criminal defense attorney, to take Schaffer’s place and prepare for trial.

Since Paxton was indicted, Cook retired from the Texas House and Hochberg died.

Why did the prosecutors make a deal?

After Schaffer stepped away, Wice said he and Jed Silverman took another look at the evidence and reinterviewed witnesses in the weeks leading up to the trial. While they were “confident” of a win, he said the process showed them “the true nature of the facts of these cases.”

“The intensive investigation and re-investigation of the facts of these cases was the ultimate game changer that, again, gave Jed and I a rational and factual understanding of what our chances for success were, not just on the third-degree felony but on the two first-degree felonies,” he said.

When asked why that didn’t happen some time earlier in the nine years, Wice declined to comment but then added: “The fact that it was done matters more than the fact that it was done belatedly.”

He said Paxton’s agreement to pay restitution to Cook and Hochberg also made the deal palatable. He said the deal Schaffer was discussing did not include a payment to the accusers.

“What made this deal radically different from the one that was offered six weeks ago, is that in a typical criminal case, victims are seldom if ever made whole,” Wice said.

He read a statement from the accusers’ lawyer, Terry Jacobson, in which he said his clients appreciated “the diligent legal work” of the prosecutors. Wice said, “That provision mattered more to me than anything else.”

Last month, Cogdell said Wice kept the cases alive to see his name in the news. Wice called that “utter and sheer nonsense.”

What’s still unanswered is whether the prosecutors will get paid. Wice said he would be notifying the court that this case is over in the hopes that Collin County commissioners cut them a check for their remaining work.

Lauren McGaughy is an investigative reporter and editor at The Texas Newsroom. Got a tip? Email her at lmcgaughy@kut.org. Follow her on X and Threads @lmcgaughy.
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