Texas Attorney General Paxton pleads not guilty to fraud charges

Reuters News
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Posted: Aug 27, 2015 12:47 PM

By Marice Richter and Jon Herskovitz

FORT WORTH, Texas (Reuters) - Texas Attorney General Ken Paxton, a Tea Party Republican, pleaded not guilty on Thursday to three felony charges of securities fraud during his first court appearance in a case that threatens his political career.

If convicted of first-degree felony, the state's top lawman could face up to 99 years in prison.

A lawyer for Paxton, 52, asked State District Judge George Gallagher to keep cameras out of the courtroom when the case goes to trial.

"We don't want this case tried in the press. We want this case tried in the court room," attorney Joe Kendall said. He then told the court he is stepping down as Paxton's attorney for unspecified reasons.

Paxton is facing pressure to quit. The Texas Democratic Party is calling for his resignation, and a poll released this week by the Longview-based Texas Bipartisan Justice Committee showed 62 percent of Republicans also think he should step down.

Spokesmen for Paxton have tried to disparage the investigation, which they say is faulty and politically motivated.

The probe that led to the charges against Paxton was conducted by the Texas Rangers, a highly respected statewide police agency, and two special prosecutors, including one who represented Tom DeLay, a prominent Republican and former U.S. House of Representatives majority leader.

After defeating an establishment Republican in the primaries, Paxton became attorney general this year pledging to fight abortion, same-sex marriage and the Affordable Care Act, also known as Obamacare.

He drew national attention when he said Texas county clerks who object to gay marriage on religious grounds can refuse to license same-sex couples despite the U.S. Supreme Court's June ruling requiring states to allow same-sex marriage.

Paxton is facing two security fraud charges related to stock sales and compensation from the Texas technology company Servergy. The company had been under federal investigation for suspected misstatements about orders for its data servers.

He is also facing charges he illegally acted as a securities agent for another firm.

When in the state legislature, Paxton was hired to seek clients by investment firm Mowery Capital Management, which is facing allegations from the State Securities Board of defrauding investors.

The board found in May 2014 that Paxton was not properly registered as an investment adviser. It reprimanded him and fined him $1,000.

(Reporting by Marice Richter in Fort Worth and Jon Herskovitz in Austin; Editing by Mohammad Zargham)