A whistleblower told a courtroom on Monday that Attorney General Ken Paxton and developer Nate Paul mistrusted federal government officials and the AG ignored warnings of the danger from staffers concerning his improper collaboration with Paul.
“I told him (Paxton) this could lead to a scandal you should not be doing this,” Mark Penley said.
Paxton is under indictment for alleged securities fraud and now faces impeachment over allegations of alleged abuse of office. Paul is charged with eight felony counts of making false statements to financial institutions.
Defense attorneys countered there is no hard evidence against Paxton and indicated that federal officials including the FBI can make mistakes.
Penley, former deputy attorney general for criminal justice, said Paxton pressured him to investigate federal officials investigating Paul, who Paul claimed had unfairly targeted him. Penley called it a “counter attack” by Paxton.
Penley is one of seven AG staff whistleblowers who went to the FBI in 2020 to report possible criminal activities by Paxton and Paul. Penley is also one of four plaintiffs who sued the AG for terminating him and allegedly damaging his career.
Penley said after he discovered that an outside attorney Brandon Cammack had been hired by Paxton to investigate allegations made by Paul alleging harassment by federal government officials, he was highly disturbed.
“I was apoplectic,” Penley said.
Penley said he had tried to save his boss Paxton from further missteps that could damage the AG’s tenure and his office as well.
“I said I would not approve Cammack’s contract,” Penley said. “I said I can’t proceed with an investigation. I have no evidence (of wrongdoing).”
“What did he (Paxton) say?” Rusty Hardin the prosecution attorney asked.
“He said we’ll have to disagree,” Penley recalled. “He (Paxton) was passive-aggressive. He would agree with you, and then go behind your back.”
Penley said Paxton’s subsequent actions clearly showed he would not back off from conflict-of-interest behavior.
Paxton faces 20 articles of impeachment including disregard for public duty, making false statements, bribery and obstructing justice, conspiracy to defraud, dereliction of duty and violation of public trust. Paul has been a political donor for Paxton, a Republican.
Paul claimed that federal officials who raided his home and business in 2019 did so improperly, changing a search warrant from a search for guns and drugs into a search for records.
Paxton allegedly accepted favors from Paul including making renovations to the AG’s residence and a job for a woman with whom Paxton was having an extramarital affair.
Paxton is also accused of seeking revenge against the seven employee whistleblowers who went to the FBI and of using his office to benefit Paul.
Defense attorneys from the beginning of the trial have maintained the case was brought about by disloyal staffers who falsely assumed wrongdoing by Paxton and then refused to admit error.
Paul was charged in an eight-count federal indictment in June of 2023 alleging federal crimes in 2017 and 18. Whistleblowers said in return for an opinion from Paxton halting the foreclosures of Paul’s Austin properties under pandemic rules (forbids gatherings of people), Paul donated $25,000 to Paxton’s campaign, remodeled his house and provided a job for Paxton’s then-mistress Laura Olson.
Paxton is also accused of directing employees to intervene in a 2018 lawsuit filed by directors of the Roy F. and Joann Cole Mittee Foundation, a quality of life charity nonprofit. The Mitte Foundation invested millions in Paul’s World Class companies in 2011 and then in a dispute over getting access to Paul’s records and getting their money back sued Paul in 2018. In July of 2019 the parties reached a settlement agreement to have World Class buy Mittee’s interest in the companies for $10.5 million.
Prosecution attorneys said the settlement deal Mittee received was “lowball.”
During Monday’s session Penley told Hardin that his initial reaction to Paxton’s continuing involvement supporting Paul was that it was “crazy.”
“We hoped the attorney general would drop it,” Penley said. “David Maxwell (Texas Ranger) and I saw no merits to the (Nate Paul) case. That the attorney general would investigate a federal magistrate, judge and prosecutors was insane.”
Penley called it a “giant red flag.”
“This was not a safe matter, his (Paul’s) reaching out to the attorney general for legal help,” Penley said.
Penley said Paul and his attorney Michael Wynne wanted AG staffers to agree that a federal U.S. attorney was involved in a felony-level crime that occurred after search warrants were issued from a federal judge, and which led to a grand conspiracy to target Nate Paul.
Penley said he told Paxton that he should not proceed with an investigation of federal officials and the matter should be closed. Paxton appeared to agree.
“He (Paxton) said okay, fine,” Penley said.
Meetings were held between Paxton, Penley, Maxwell, Paul and Wynne.
Penley said at the third the meeting Paul was angry and said he had a First Amendment right to proceed with an investigation of federal officers.
“I said you’ve got to have some evidence that a crime has been committed,” Penley recalled.
Penley said Paul and his attorney declined to give him documentary evidence because they said they didn’t trust him. He added that Paul’s actions opened the AG up to possible bribery or being blackmailed.
“I tried to find a way to tell him (Paxton) we had no power to take Paul’s side,” Penley said. “My hope was that I could dissuade him (Paxton).”
Penley said over time he came to the conclusion he would be fired by Paxton. He was placed on administrative leave and then fired in November of 2020. This after being told by a new-hire AG assistant that he had lost Paxton’s trust and had refused to turn over relevant texts on his cellular phone.
Under cross examination defense lawyer Mitch Little told Penley there was nothing illegal in Paul’s asking for an investigation.
Penley agreed.
“Were you asked to do something illegal?” Little asked.
“Obstruct a federal investigation,” Penley answered.
“In September of 2020 you were concerned that the attorney general was going to fire you?” Little asked.
“Yes,” Penley said.
“You had no evidence,” Little said.
“I had circumstantial evidence,” Penley said.
“Why did you not confront him (Paxton) with it?”
“I was trying to convince him (Paxton) to get away from causing harm to the (AG) office,” Penley responded.
Penley disagreed with Little’s contention he only became concerned about the case after he thought that Paxton would fire him.
“It was his (Paxton’s) refusal to listen to reason,” Penley said, “his absolute refusal to listen to any of his staff.”
Little asked Penley if he had been digging up dirt on Paxton.
Penley said Cammack attempted to help Paul by investigating his claims of a federal conspiracy against him and by submitting subpoenas to Texas banks.
Little called attention to a document in which Penley had noted, “Paxton should be indicted.”
“Yes, because I believed he had broken the law,” Penley agreed.
On re-cross examination Hardin asked Penley if there was any way he would have supported an investigation of federal officials.
“Absolutely not,” Penley answered.
Greg Cox, former special prosecutor for the Travis County District Attorney’s Office who conducted a preliminary investigation of Paxton and Paul, recited a list of possible crimes committed by the DA. These included accepting a bribe and a gift as a public servant, violating the law, abuse of power, coercion of a public servant, election code violations, money laundering, tampering with records, perjury, oppression and employee retaliation.
Former Travis County District Attorney Margaret Moore appeared late in the day. Moore, DA from 2017 to 2020, said her office refused to proceed on Paul’s complaint against federal officers. She said the charges of conspiracy made by Paul against so many federal officials lacked reason and called them "ridiculous."
“We did not find this broad conspiracy to have any merit,” Moore told defense attorney Gary Buzbee.