Indicted Attorney General Ken Paxton's arguments to dismiss securities fraud charges appear to becoming more desperate, if special prosecutors' recent filings are any indication.
In a series of elegantly acerbic responses, Brian Wice, Kent Schaefer, and Nicole LaBorde have painted Paxton as an Animal House-esque doofus and a student of the Don Draper School of Smokescreens. The prosecutors' latest batch of responses similarly point out the folly of Paxton's latest unreasonable reasoning — namely, his argument that he cannot legally be prosecuted because the Texas State Securities Board did not refer his violation to authorities for criminal charges.
As prosecutors note, Paxton admitted to the Board that he solicited clients for a friend's money management firm, Mowery Capital Management, without registering as an agent with the Board, a violation of state securities law. Paxton's unregistered dabbling in securities was unearthed by Texas Tribune reporter Jay Root, and Paxton's campaign acted quickly, in the hopes of killing the story before it became an issue in the election. Paxton admitted his violation and received a $1,000 slap-on-the-wrist from the Board.
Prosecutors state that the Board did not know the extent of Paxton's questionable securities-related activity until after that fine; it wasn't until later that Paxton's solicitation on behalf of a Dallas tech start-up called Servergy was revealed. Paxton peddled the company to friends without disclosing the fact that he was being compensated in stock. Servergy is currently under investigation by the Securities and Exchange Commission for allegedly misleading investors.
"At the time Paxton and his legal team scurried to cut a deal with the TSSB in April of 2014 to get this matter off the front page...the TSSB did not know, nor could it have reasonably known, about the trail of criminality that linked Paxton, [Servergy founder] Bill Mapp, and Servergy," prosecutors stated in one of four motions filed last week.
The motion further alleges that Paxton "was able to walk away from the [Mowery Capital Management] imbroglio with a fine because the TSSB could only see the tip of the iceberg representing the actual depth and breadth of his criminality...."
The motion also attacks Paxton's novel argument about the purported unfairness of his indictment: Paxton entered into an agreed order with the TSSB, which didn't refer the matter for criminal charges, but wound up being indicted anyway. This, Paxton argued, means that any agreed order with the TSSB "is a ticket to criminal investigation." Ostensibly, Paxton seems to argue, this sets a precedent that would keep violators from quickly resolving matters with the TSSB, essentially "neutering" it.
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But prosecutors argue that "a disciplinary order 'is a ticket to criminal investigation' only if the respondent's itinerary, like Paxton's, has a layover with the likes of Bill Mapp and Servergy...."
Prosecutors also claim that the TSSB did not know at the time of the disciplinary order that Mowery Capital Management was asking its clients to sign backdated documents that stated they knew Paxton was being compensated.
So far, Paxton has fought his charges on technical and procedural grounds — plus a personal attack on a judge and his wife, for good measure. This has forced prosecutors to spend time shooting down those arguments, meaning that few of the motions filed by either side so far get to the actual substance of Paxton's alleged criminal activity. The motions filed last week come closer to describing that activity, and we look forward to seeing more of that.