Dwight covered the indictment of Texas Attorney General Ken Paxton on “three felony counts of securities law violations” a while back, but I wanted to touch on a few unusual aspects to the indictment.
Now I’m just a simple
Hyper-Chicken from a backwoods asteroid blogger, so I won’t pretend to know the ins and outs of the security laws Paxton theoretically violated. But it does appear that something stinks about the Paxton indictment:
The two charges of fraud against Paxton don’t involve misrepresentation on Paxton’s part, or any other violation of a clear principle. Rather, the prosecutors think Paxton should have volunteered more information about his own investments in the course of selling stock in a company, and that his not doing so amounts to fraud.
Paxton isn’t being accused of telling a lie, which is a factual question. He’s being accused of the much more subjective charge of misleading investors by failing to state a material fact. Actually, the indictments just allege the failure to state a fact; they don’t explain how anyone was misled.
Mateja told Texas Lawyer he had expected Paxton would be accused of making a fraudulent misrepresentation, and that he was surprised by the actual indictment.
“They are saying that it was unlawful for him to fail to mention that he had not personally invested (in a tech company called Servergy) and he would be receiving compensation,” Mateja said.
If that by itself were found to be a crime, securities traders across the state could be facing criminal exposure every time they make a sale, unless they take the unusual step of telling clients that they hadn’t purchased the stock for their own portfolios.
Paxton did have stock in Servergy, though: 100,000 shares that he’s been reporting on his annual disclosure forms since 2011.
The prosecutors are apparently unclear about whether Paxton already held those shares when he solicited investors, or whether he got them later, as they accuse him of failing to disclose to them that he “would be compensated, and had, in fact, received compensation from SERVERGY, INC., in the form of 100,000 shares.”
So either he would be or he had been. What the newspapers miss is that this isn’t an explicit violation of any law. It’s the special prosecutors’ opinion that Paxton should have volunteered this information.
The Paxton indictment becomes even more suspect when you see who’s really behind them, mainly Texas Speaker Joe Straus’ team.
There is now little doubt that the coalition government of liberal Republicans and Democrats who control the Texas House are responsible for the politically motivated indictments against Texas Attorney General Ken Paxton.
The leadership of that coalition, headed by Speaker Joe Straus, and Paxton have been political opponents for several years. In 2011, Paxton challenged Straus for the Speaker’s office and though he was unsuccessful, Paxton went on to win an open state senate seat in 2012. From there, he launched an underdog bid for Attorney General, defeating Straus’s boyhood friend, Rep. Dan Branch, in the process.
The indictments against Paxton were unsealed on Monday to reveal that the complainants were none other than Rep. Byron Cook (R–Corsicana) and a Florida businessman with connections to Cook, Joel Hochberg.
Cook is chairman of the powerful House Committee on State Affairs. It was at Cook’s Austin home that Straus was chosen to be speaker in 2009. As one of Straus’s most powerful lieutenants, Cook used his committee this session to stop a major ethics reform package, to bury pro-life legislation and legislation aimed at curbing illegal immigration, and to prevent a vote on legislation aimed at protecting paychecks from being raided by public employee unions.
Hochberg was not well known to Texans before Monday, but research reveals connections to Cook spanning decades. Cook earned his millions at the helm of a videogame publishing company named TradeWest that was founded by his father. Joel Hochberg was the creator of the popular video game “Battletoads” and other games that were published by TradeWest in the 1990s.
(I never played it, but Battletoads is widely described as the most difficult video game to beat of all time. )
On Saturday, just before the indictments were leaked to the New York Times by one of the special prosecutors involved in the case, we ran a piece examining, amongst other things, a series of open records requests filed with the offices of several members of House leadership. The requests, which were filed with the offices of House Speaker Joe Straus (R–San Antonio), Rep. Jim Keffer (R–Eastland), and Rep. Charlie Geren (R–Fort Worth), sought records of communications and meetings with the Travis County DA’s office about Paxton’s case. It is unclear what records specifically were being sought, but it is clear that the person who filed the requests, Democratic operative Matt Angle, thought there had been communications between those offices and the DA about Paxton.
Since then, a source has informed us that two other member’s of Straus’s leadership team, Rep. Drew Darby (R–San Angelo) and former Republican Rep. Harvey Hilderbran, were overheard discussing Paxton’s case at the 2014 Republican State Convention. According to the source, Darby and Hilderbran stated that they were waiting until after the 84th legislature commenced to renew their attacks on Paxton.
In short: The Paxton indictment, like the Perry indictment, appears to be more about politics than crime.
(Hat tip: Push Junction.)