Judge dismisses civil fraud charges against Texas AG for now

AP News
|
Posted: Oct 07, 2016 6:11 PM

AUSTIN, Texas (AP) — For now, embattled Texas Attorney General Ken Paxton will not face a federal securities fraud lawsuit, a judge said Friday, but Paxton is still fighting separate criminal charges of duping wealthy investors before he took office.

The apparent collapse of a civil case brought by the U.S. Securities and Exchange Commission is still a major victory for Paxton, a Republican who has spent most of his 20 months on the job under felony indictment. He has pleaded not guilty in the criminal case while trying to preserve a high profile nationally, leading lawsuits against the Obama administration over immigration, transgender rights and Syrian refugees.

U.S. District Judge Amos Mazzant "conditionally granted" a dismissal of the civil lawsuit but gave federal regulators two weeks to restate its case.

The cases brought by the SEC and criminal prosecutors are virtually identical: Both accused Paxton of luring investors to high-tech startup Servergy in 2011 without disclosing that he was being paid by the data storage company. At the time, Paxton was a state legislator from suburban Dallas, and one investor he allegedly misled was a fellow Republican lawmaker.

"Paxton did not have a legal obligation to disclose his financial arrangement," Mazzant wrote.

Two courts have so far refused to throw out two felony charges of securities fraud, which carry a possible sentence of 5 to 99 years in prison. Unless the indictments are quashed by Texas' highest criminal court, Paxton is likely to stand trial in 2017.

Federal regulators say Paxton raised $840,000 by betraying friends and using high-pressure tactics to secure investors.

He hasn't been the only state attorney general in legal trouble. In August, Pennsylvania Attorney General Kathleen Kane resigned after the Democrat was convicted of perjury and conspiracy in a case surrounding leaked grand jury information.

___

Follow Paul J. Weber on Twitter: www.twitter.com/pauljweber