Felony securities fraud charges against Ken Paxton to be dropped after 9 years

HOUSTON — Prosecutors on Tuesday agreed to drop the securities fraud charges facing Attorney General Ken Paxton if he performs community service and fulfills other conditions of a pretrial agreement, bringing an abrupt end to the nearly nine-year-old felony case that has loomed over the embattled Republican since his early days in office.

The deal, which landed three weeks before Paxton is set to face trial, also requires him to take advanced legal education courses and pay restitution to those he is accused of defrauding more than a decade ago when he allegedly solicited investors in a McKinney technology company without disclosing that the firm was paying him to promote its stock. The total amount of restitution will be “somewhere a little bit south of $300,000,” prosecutor Brian Wice said.

Paxton, who will not have to enter a plea under the terms of the agreement, faced the prospect of decades in prison if he had been convicted of fraud. His status as a felon, based in part on an opinion he issued himself, would have likely barred him from running for office in the future.

Paxton attorney Dan Cogdell said the prosecutors “approached us” and Paxton was “happy to agree to the terms of the dismissal.”

“But let me be clear, at no time was he going to enter any plea bargain agreement or admit to conduct that simply did not occur,” Cogdell said in a statement. “There is no admission of any wrongdoing on Ken’s part in the agreement because there was no wrongdoing on his part.”

The deal is the second major win for Paxton in roughly the last six months, after the Republican-controlled Texas Senate acquitted him last fall of 16 impeachment charges centered on allegations that he accepted bribes and abused the authority of his office to help a wealthy friend and campaign donor.

Still, Paxton’s legal troubles aren’t over. His agency is still facing a lawsuit brought by four former top deputies who argue that Paxton improperly fired them in 2020 for reporting him to the FBI. Those whistleblowers told law enforcement they believed Paxton was using his office to benefit Austin real estate mogul Nate Paul — the charges that formed the basis for Paxton’s impeachment last year and that are the subject of an ongoing federal investigation. He has denied all wrongdoing.

The securities fraud case, meanwhile, has been repeatedly delayed by disputes over where the trial should take place and how much the special prosecutors handling the case should be paid. The legal saga dates back to July 2015, when Paxton was indicted on three felony securities fraud charges just months into his first term as the state’s top lawyer.

Two of the charges — first-degree felonies — stemmed from allegations that Paxton persuaded investors, including a then-GOP state lawmaker, to buy at least $100,000 worth of stock in a tech startup, Servergy, without disclosing that he would be compensated for it.

He was also accused of steering clients to a friend’s investment advising business without registering with the state securities board, a third-degree felony.

Paxton has maintained his innocence and framed the case as a politically motivated witch hunt.

The fraud case began moving toward trial in November when Harris County state District Judge Andrea Beall declined to continue holding it up over a dispute about back pay owed to the special prosecutors.

The Texas Court of Criminal Appeals also declined to take up the pay issue, and Beall rejected Paxton’s attempt to toss the case last month, seeming to set the stage for an April 15 trial.

The outcome marks the latest example of Paxton emerging from scandal virtually unscathed, a trend that has baffled and enraged his critics and reinforced his status as a hero of the party's most conservative flank in Texas and beyond. He has deflected scandal repeatedly, twice winning reelection while under indictment for securities fraud and, in the most recent election, after being accused of corruption by former top deputies.

Paxton, who spent a largely uneventful decade in the state House, rose to political prominence based in part on his reputation as a stalwart backer of religious liberty who would use the attorney general's office to wage major legal battles on issues like abortion and LGBTQ rights. He has frequently sued the Biden administration on an array of policies, most notably around immigration. He also tried to overturn the results of the 2020 election in four key battleground states won by President Joe Biden, an unsuccessful bid that nonetheless cemented Paxton's political alliance with former President Donald Trump. That effort prompted the Texas State Bar to sue Paxton for professional misconduct, in a case that is still ongoing.

Trump has repeatedly come to Paxton's defense and encouraged his legions of followers to target those who have opposed Paxton, including House GOP lawmakers who voted to impeach the attorney general.

The result clears a major hurdle for Paxton's political future. He is widely seen as a likely candidate for higher statewide office and has pointedly refused to rule out the possibility of challenging U.S. Sen. John Cornyn in the 2026 Republican primary.

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This article originally appeared in The Texas Tribune at https://www.texastribune.org/2024/03/25/ken-paxton-plea-deal-securities-fraud-felony/.

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