Mowery Capital Management Securities and its founder Frederick “Fritz” Mowery—a business associate and friend of Paxton—received the nearly six-digit fine for violating state securities laws by providing false documents to Texas investigators and misleading clients about a past bankruptcy.
The State Securities Board order [PDF] was issued in relation to an investigation that began in November 2014 that examined whether Mowery violated securities laws by misrepresenting information in required disclosure documents and failed to properly disclose business ties to clients, among other actions, the San Antonio Express reported.
Several changes and additions were made to Findings of Fact and Conclusions of Law in the Proposal for Decision by administrative law judges and the Securities Commissioner himself. “Based on the foregoing Findings of Fact and Conclusions of Law, the Securities Commissioner concludes that the respondents have violated the Texas Securities Act,” the order said.
Mowery and his financial management firm were both instructed to “immediately cease and desist from engaging in any fraudulent conduct enumerated herein in connection with rendering services as an investment adviser,” according to the order signed by Securities Commissioner John Morgan.
Additionally, Mr. Mowery was fined $40,000 for two separate violations of the act—$20,000 each. Mowery Capital Management was fined $10,000 for each of the four violations it made to the law. For a separate violation, Mr. Mowery was charged an additional $10,000 fine and Mowery Capital Management must pay half of the court reporting transcription costs, which is about $2,930. In total, Mowery and his firm were fined $92,930.37.
Morgan could have chosen to revoke both Mowery’s individual and Mowery Capital’s state financial licenses or charge steeper fines, but because “there was no intent to deceive or defraud and no evidence of actual harm to clients or the public,” it appears he opted not to seek a harsher penalty.
News of the large fine against a company connected to Paxton has many Texans buzzing about the impact this case may have on Paxton’s own legal issues.
The attorney general was reprimanded for failing to register as a representative with Mowery Capital in May 2014. Paxton solicited three clients for the firm in 2004, 2005 and 2012, and was paid part of the asset management fees, according to a report in the New York Times. Paxton was fined $1,000 for violating the Texas Securities Act, but was not criminally prosecuted at the time.
However, the left-leaning nonprofit watchdog group Texans for Public Justice filed a criminal complaint against Paxton with prosecutors in Austin, and asked the court to prosecute Paxton for committing a third-degree felony.
After the Texas Rangers investigated the case, Paxton was indicted in August 2015 on three counts: Two felony securities fraud charges and one count of third-degree failure to register.
Punishment for a first-degree felony conviction in Texas can range from five years to life in prison. A third-degree felony punishment ranges from two to 10 years.