Lone Star Justice

by Mark Pulliam |
Feb. 20, 2017, 6:47pm

This column first appeared Feb. 17 on City Journal.

Texas history is filled with larger-than-life figures who overcame long odds and severe hardships. In many ways, the frontier ethos persists 181 years after the fall of the Alamo. Unfortunately, partisan factions have frequently weaponized Texas’s legal system to preserve power and punish political enemies. Call it frontier justice.

The rogue’s gallery of Texas politicians who have used dubious means to pursue elective office includes Lyndon B. Johnson, whom biographer Robert Caro contends stole the Democratic Senate primary in 1948 (and whom many historians believe later helped John Kennedy rob Richard Nixon of the presidency in 1960); Texas House speaker Gus Mutscher (and several Democratic colleagues), who were convicted of conspiracy in the so-called Sharpstown scandal in 1972; U.S. House speaker Jim Wright, who resigned in 1989 following an ethics investigation into his fundraising practices; and Texas attorney general Dan Morales, who went to prison in 2003 for seeking to enrich himself in the tobacco settlement he oversaw. On the other hand, Texas has also seen its share of unjustified prosecutions of political or public figures, including U.S. senator Kay Bailey Hutchison, House majority leader Tom DeLay, Governor Rick Perry, and University of Texas regent Wallace Hall, all of whom were ultimately vindicated.

On May 1, 2017, a criminal-fraud trial will commence in Collin County district court against Texas attorney general Ken Paxton, a first-term Republican elected in 2014. Is Paxton another corrupt officeholder who got caught or an innocent official being persecuted by political foes? The record to date offers some telling clues.

Paxton was indicted by a grand jury in July 2015 for “securities fraud” and “failure to register,” based on improprieties that allegedly occurred in 2011, when Paxton was an estate-planning and business attorney in McKinney, a suburb of Dallas. Paxton was also serving part-time in the Texas House of Representatives, to which he had been elected in 2002. The Texas legislature meets for 140 days every other year. Paxton’s law practice sometimes referred clients to investment advisers, whose work is regulated by the state. Because he received referral fees from an adviser, Paxton was technically a “representative” required to register with the Texas State Securities Board. Paxton had filed the required paperwork in 2003 and 2013 but inadvertently failed to do so during other years when he acted as a “representative.” In 2014, while campaigning for attorney general, Paxton was reprimanded by the securities board for this paperwork violation; he made a routine administrative settlement with the state, paying a $1,000 fine.

Despite extensive news coverage of the violation and settlement, Paxton won the Republican nomination, and in November 2014, he was elected attorney general by more than 20 percentage points, outpolling his Democrat opponent by nearly 1 million votes. In Texas, elections for statewide offices are determined in the Republican primary, due to the state’s overwhelming GOP orientation; the Republican nominee usually goes on to win the general election. As fate would have it, Paxton’s vanquished opponent in the hard-fought Republican primary in 2014 was his former House colleague, the moderate Dan Branch.

Instead of resolving the issue, Paxton’s settlement with the securities board attracted the attention of Texans for Public Justice, a left-leaning “watchdog” group with ties to the plaintiffs’ bar. As it had done with Governor Rick Perry in 2013, the group filed a criminal complaint against Paxton with the district attorney in Travis County, liberal home of the state capital, Austin. Travis County prosecutors, who had pursued the baseless prosecutions of other Republican elected officials, demurred on the grounds that Paxton’s potential criminal conduct occurred elsewhere. They forwarded the matter to Collin County, where Paxton resides. Collin County district attorney Greg Willis recused himself due to personal ties with Paxton, but not before asking the Texas Rangers to conduct an investigation. At this point, things started getting weird.

Because of Willis’s recusal, many observers expected an adjoining county to handle the case. Instead, in 2015, an outside “special prosecutor” was appointed to handle the paperwork charge against Paxton, at taxpayer expense. At the direction of a Collin County judge—whom Paxton supporters accuse of bias—two Houston-based criminal defense lawyers, Kent Schaffer and Brian Wice, were hired as “special prosecutors,” with an unlimited budget. The two Houston lawyers, now supplemented by a third attorney, Nicole DeBorde, have billed the county for nearly $600,000 so far, despite a taxpayer lawsuit challenging the open-ended compensation arrangement.

In 2015, the special prosecutors presented Paxton’s case to a grand jury and emerged with a three-count felony indictment: one for the paperwork violation (which had never before been prosecuted as a crime following an administrative settlement), the other two for unrelated matters arising from an investment in a local technology start-up that Paxton had pitched to acquaintances—all experienced investors—in 2011.

The indictment alleges that Paxton engaged in “securities fraud”—a first-degree felony—by not volunteering to potential investors in the McKinney-based Servergy Inc. that he had received stock in the company as compensation for his recruitment efforts. According to the special prosecutors, two of the investors Paxton solicited—including a GOP colleague in the Texas House who later backed Paxton’s primary opponent for attorney general—“assumed” that Paxton had bought his shares. Servergy ultimately failed to pan out as an investment, though no wrongdoing is alleged. Nor is Paxton accused of making false representations to the investors. At the heart of the fraud charge—potentially punishable by up to 99 years in prison—is Paxton’s failure to disclose that he hadn’t bought his Servergy shares.

Prosecuting silence as a crime is a novel theory. Paxton maintains that he had no legal obligation to disclose how he obtained his Servergy stock and disputes that the failure to do so can be prosecuted as criminal fraud. He tried and failed to get the charges dismissed by both the trial court and the Texas Court of Criminal Appeals. Another Texas attorney general, Democrat Jim Mattox, was indicted in 1983, acquitted two years later, and handily reelected in 1986. If convicted, however, Paxton might be forced to resign, an outcome that his supporters suspect has been the goal all along.

Paxton contends that the indictment is politically motivated. Collin County, while controlled by Republicans, is split between conservative and moderate factions. Paxton, a conservative, sees himself as the target of moderates aligned with his primary opponent, Branch, and Texas House speaker Joe Straus, whom Paxton challenged in 2010. One of the disgruntled Servergy investors claiming to be defrauded by Paxton is Rep. Byron Cook, one of Straus’s key lieutenants (as was Branch). Removing Paxton from office and replacing him with Branch would be a political twofer for the moderate camp.

In a welcome turnabout for Paxton, the prosecution has recently been dealt some unexpected setbacks. First, a federal court in San Antonio removed one of Paxton’s special prosecutors, Kent Schaffer, from an unrelated racketeering case involving murder, drug dealing, and other crimes against the former president of the Bandidos motorcycle gang, whom Schaffer was defending. Federal prosecutors had alleged that the scope of Schaffer’s prior representation of the Bandidos as “house counsel” crossed the ethical line and accused Schaffer of being an unindicted co-conspirator in the Bandidos’s “criminal enterprise” under RICO. Schaffer will continue to participate in the Paxton case, but the Bandidos ruling is a blow to his reputation. Second, the court of appeals blocked further payments to the three special prosecutors, ruling in favor of a taxpayer (and Paxton supporter) who challenged payments to court-appointed counsel in excess of the statutory cap. Finally, the prosecutors filed a remarkable motion requesting that Paxton’s trial be moved from Collin County to a different venue, citing pretrial publicity unfavorable to the prosecution. The special prosecutors seem oblivious to the fact that criminal defendants have a Sixth Amendment right to a jury trial in the district where the crime is alleged to have been committed.

Texans have seen many political scandals and witch hunts over the years, but never—until the indictment of Attorney General Paxton—have we seen a real-life version of House of Cards meets Sons of Anarchy. The season finale won’t take place until May 1, so stay tuned.

Want to get notified whenever we write about Texas Office of the Attorney General ?
Next time we write about Texas Office of the Attorney General, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story

Texas Office of the Attorney General
300 W 15th St
Austin, TX 78701

More News