Texas Attorney General Ken Paxton is under investigation for accepting $100,000 from the head of a company that was being investigated for fraud, and a decision on whether to pursue bribery-related charges is expected soon.
The money, part of almost $548,000 Paxton has collected to help pay for his legal defense against felony charges that he defrauded investors in private business deals in 2011, came from James Webb of Frisco, the president of Preferred Imaging, a medical diagnostic firm.
In 2016, Preferred Imaging paid $3.5 million to settle a whistleblower lawsuit that accused the company of violating Medicaid billing rules. The settlement was signed by U.S. Justice Department officials and the head of Paxton’s Civil Medicaid Fraud Division.
Kaufman County District Attorney Erleigh Wiley told The Dallas Morning News on Thursday that she has been investigating whether accepting Webb’s donation violated state bribery laws that limit gifts from people subject to the “jurisdiction” of a public servant. The complaint to the Texas Rangers came from the lawyer of the whistleblower who launched the investigation into Preferred Imaging, she said.
“There is an active investigation looking into that matter,” Wiley, a Republican, told the newspaper. “We are carefully and thoroughly going through every piece of evidence.”
Wiley, who said she has received “great cooperation” from Paxton’s lawyers, added that she was close to deciding whether to present the case to a grand jury.
A Paxton spokesman said Webb’s 2015 donation, disclosed as required by Paxton in his personal financial statement, was legal and had been thoroughly examined by lawyers who are ethics experts.
“We have fully cooperated with this inquiry since it began, and we have every indication from the Kaufman County DA’s office that it will be completed soon,” spokesman Matt Welch said. “Despite irresponsible media speculation and wishful thinking by political opponents, all the donations given to the Paxton legal defense effort are in full compliance with state law.”
The Kaufman County probe has been “going on for months, and we have been cooperating the entire time,” Welch said. “We are very confident we are going to be vindicated at the end of this process.”
Shortly after Paxton disclosed the Webb donation in the summer of 2016, Paxton spokesman Marc Rylander denied there was an ethics problem because federal prosecutors took the lead on the Preferred Imaging case and Paxton was not involved in the investigation.
In addition, he said, the agency’s fraud unit did not receive a referral in the case and therefore did not investigate the company.
“As we have previously stated, there was no investigation by this office,” Rylander said at the time.
However, the Justice Department and Justin Sumner, a Dallas lawyer for the whistleblower who sued Preferred Imaging, have said that Paxton’s Medicaid fraud unit was part of the investigation.
Preferred Imaging admitted no wrongdoing when it settled accusations of performing procedures without an on-site physician present, a violation of Medicaid billing rules.
Paxton was charged in the summer of 2015 with two counts of securities fraud alleging that he pushed stock in a McKinney company without telling potential investors that he was being paid for the work. He also was charged with failing to register with state securities regulators in 2012.
A trial on the failure to register charge, set for Dec. 11, was delayed during a Houston hearing Wednesday, and a new date has not been set.
Fueled by a legal defense fund that raised almost $330,000 in 2015 and $217,700 last year, Paxton has mounted a vigorous defense of the charges, including spending almost a year in an unsuccessful attempt to get the charges dismissed by the trial judge and two appellate courts.
Under state law, people with an existing “personal, professional or business relationship” independent of Paxton’s role as attorney general may donate to his defense fund.
Listed on Paxton’s disclosure forms as a family friend, Webb provided the largest single gift to Paxton’s legal defense fund — exceeded only by two $75,000 donations from Carrie Parsons, vice chairwoman of the Freeman Inc. decorating company, and her husband Steven Parsons of Dallas, in 2015 and 2016. Donations to the fund for 2017 won’t be known until Paxton files his financial disclosure form with state regulators next year.
Webb also has been a major donor to Paxton’s political campaigns, providing $233,000 since 2011, including $25,000 in June.