Feds not dropping fraud case against Texas attorney general

AP News
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Posted: Oct 21, 2016 7:06 PM

AUSTIN, Texas (AP) — Investor fraud accusations against Texas Attorney General Ken Paxton are back in federal court, at least for now, after the U.S. Securities and Exchange Commission on Friday refiled a civil lawsuit against the Republican that a judge previously dismissed.

Paxton is also fighting separate criminal charges of securities fraud, which carry a possible prison sentence of 5 to 99 years, and the do-over by the SEC again puts Texas' top prosecutor battling nearly identical cases at once.

Paxton had recruited wealthy investors for a high-tech startup called Servergy Inc. in 2011, when he was still a state legislator, and both the SEC and criminal prosecutors say he misled those investors by not disclosing that the company was paying him.

U.S. District Judge Amos Mazzant, however, ruled this month that Paxton was under no obligation to disclose his arrangement and said the SEC lacked evidence of fraud. But rather than drop their case against Paxton, federal regulators took Mazzant up on his offer to let them hone their arguments and try again.

Paxton attorney Matthew Martens said he was "disappointed" by the SEC's decision to go back to court given the concerns Mazzant raised the first time around.

Unlike in federal court, Paxton hasn't been able to convince a state court to dismiss the criminal charges against him. That includes the Texas Court of Criminal Appeals, which is the same Republican-dominated panel that earlier this year threw out felony abuse-of-power charges against former Gov. Rick Perry.

Paxton was indicted on two felony counts of securities fraud in July 2015, just six months after becoming attorney general, and would likely stand trial next year at the earliest.