Texas AG Ken Paxton reaches deal to end securities fraud charges after 9 years

By JUAN A. LOZANO
Associated Press

HOUSTON (AP) — Texas Attorney General Ken Paxton on Tuesday agreed to pay nearly $300,000 in restitution under a deal to end criminal securities fraud charges that have shadowed the Republican for nearly a decade.

The announcement by special prosecutors in a Houston courtroom came less than three weeks before Paxton was set to stand trial on felony charges that could have led to a prison sentence. It was the closest Paxton — who was indicted in 2015 — has ever come to trial over accusations that he duped investors in a tech startup near Dallas.

Under the 18-month agreement, the special prosecutors would drop three felony counts against Paxton as long as he pays full restitution to his victims, and completes 100 hours of community service and 15 hours of legal ethics education. A former special prosecutor said the chance of a conviction was going to be “50-50.”

Paxton said little during the hearing, and he avoided reporters by leaving the court through a back door.

But in a statement released later Tuesday, Paxton — one of the nation’s most prominent state attorney generals, who just six months earlier was acquitted of corruption charges in an impeachment trial in the Texas Senate — remained defiant.

“There will never be a conviction in this case nor am I guilty,” said Paxton, while thanking his family and supporters “for sticking by my side.” The agreement lets Paxton remain in his elected position and doesn’t affect his law license.

Dan Cogdell, a Paxton’s attorney, said prosecutors would never have been able to prove their case at trial, but he conceded that it was cheaper for Paxton to accept the agreement.

“Number one, the economics are actually in his favor for not going to trial. And number two, it’s a guaranteed dismissal at the end of the day,” Cogdell told reporters.

Houston attorney Brian Wice, who was one of the special prosecutors, described the deal as a victory that requires Paxton to repay investors, including Byron Cook, a former GOP lawmaker who served with Paxton in the Texas Legislature, and the estate of Joel Hochberg, a South Florida businessman who died last year.

Wice, who previously indicated that he would consider a pre-trial deal a “slap on the wrist,” said he and fellow prosecutor Jed Silverman reevaluated their chance of success based on evidence and witnesses.

“Our primary duty is to do justice, not to convict. So, the question isn’t whether or not who won, but was justice served? And I think the answer to that is unmistakably yes,” Wice said.

Kent Schaffer, who worked as a special prosecutor on the case until February and had tried to broker a similar settlement, said insufficient resources and antagonistic witnesses could have hindered the prosecutors’ case.

“I didn’t think we had a bad case, but it’s 50-50. It could go either way,” said Schaffer, a Houston-based criminal defense attorney.

The Cook and Hochberg families said in a statement they are “grateful that they will receive restitution in full.”

Wice acknowledged the long arc of the case that shuffled between four different judges over the years, ping-ponged between courtrooms in Dallas and Houston, and was slowed by the aftermath of Hurricane Harvey in 2017.

The resolution of the securities fraud case furthers a dramatic reversal of political fortune for Paxton, who just a year ago appeared imperiled by the criminal case and the threat of being removed from office after his top aides reported him to the FBI.

But Paxton has emerged emboldened. He waged war against dozens of GOP lawmakers who were part of the 2023 effort to impeach him, with his biggest target being state House Speaker Dade Phelan, who was forced into a May 28 runoff. He has also not ruled out a primary challenge to Republican Sen. John Cornyn in 2026.

Paxton still faces legal troubles, however. A federal investigation has been probing some of the same charges presented in his impeachment and former aides who reported Paxton to the FBI are trying to make him testify in a whistleblower civil lawsuit.

The securities fraud case has hung over Paxton nearly his entire time in statewide office. Yet the 61-year-old has shown political resilience time and again, winning over conservative activists, and importantly within the GOP, former President Donald Trump.

Paxton had been accused of defrauding investors in a Dallas-area tech company called Servergy by not disclosing that he was being paid by the company to recruit them. He was charged with two counts of securities fraud and one count of not being registered as an investment adviser.

James Spindler, a professor of business and law at the University of Texas at Austin, said it was surprising that Paxton even faced a felony prosecution. He described one of the charges — failing to register as an investment adviser — as a technical violation and said most similar cases are settled as civil lawsuits.

Legal experts have said over the years that the longer the case drags on, the harder it would be for both sides.

Paxton was also charged in a federal civil complaint filed by the U.S. Securities and Exchange Commission over his work with Servergy. But a federal judge in March 2017 dismissed the complaint against Paxton. The person who recruited Paxton to work with Servergy, ex-company CEO William Mapp, was found liable by a jury for misleading investors and ordered to pay a civil penalty of $22,500. Mapp lost his job with Servergy and later had to work as an Uber driver to make ends meet, according to court documents.

The fraud allegations were among the original 20 articles of impeachment but were set aside during the impeachment trial in the Texas Senate last year.

Paxton’s political opponents, most notably Republicans, had used the fraud charges against him in elections. But Paxton has twice been reelected as attorney general since his indictment, most recently in 2022.

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This story corrects the spelling of the name of one of Paxton’s attorneys. He is Dan Cogdell, not Don.

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Associated Press writers Jim Vertuno and Acacia Coronado in Austin, Texas contributed to this report.

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