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Attorney General Ken Paxton Mentioned in SEC Probe

Ken Paxton has had, well, an interesting first six months as state attorney general.

He's emerged a national political figure in the Culture Wars after giving state employees the thumbs up to openly defy last month's U.S. Supreme Court ruling legalizing same-sex marriage. Meanwhile, special prosecutors tasked with investigating Paxton have said they hope to indict the state's top lawyer on a first-degree felony securities fraud charge. Paxton's lawyer, a former federal judge, has brushed off the investigation as a “politically motivated” hit job — which rings somewhat hollow when you consider the investigators were picked by a Republican judge, and friend of Paxton's, in Collin County, a GOP stronghold.

Now, Paxton's name has come up in connection with a federal probe into a company in which he's an investor. The Associated Press broke the story last night:

Texas Attorney General Ken Paxton, whose admitted violations of state securities laws will go before a grand jury this month, has also figured in a federal investigation of a Dallas-area technology company suspected of defrauding investors.

Paxton owns at least 10,000 shares in Servergy Inc., a company based in his hometown of McKinney. The U.S. Securities and Exchange Commission began investigating Servergy in 2013 after receiving complaints, according to federal court records reviewed by The Associated Press. The records show Paxton's name was singled out as a search term to satisfy an SEC demand for documents and Paxton's law firm email address was among a lengthy list of Servergy contacts searched as part of the SEC's investigation.

According to SEC filings, Servegy is suspected of making “misstatements” – or lying – to investors by falsely claiming its data servers had already been sold huge companies like Amazon and Freescale. The feds also question whether the company inaccurately told investors that its data servers need up to 80 percent less cooling, energy and space than those of competitors. According to the SEC, the company raised some $26 million selling shares in 2013.

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It's unclear as of yet whether this is just a minor hiccup for Paxton or sign of some deeper trouble down the road. His name appears alongside about 70 other contacts in a list of search terms contained in a subpoena the SEC sent Servegy. As the AP reports, some of the other contacts on that list are Paxton political donors. 

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