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Ken Paxton arrested, booked; indictment released

Facing three felony counts of securities law violations, Texas Attorney General Ken Paxton was arrested, fingerprinted and photographed Monday morning for alleged violations that took place when he was a state legislator.

Indicted by a Collin County grand jury last week, Paxton surrendered at the county jail in his hometown of McKinney, avoiding assembled reporters by entering through a side door.

He posted three personal-recognizance bonds for a total of $35,000 — no money was required to change hands — before being released about 20 minutes later.

“Attorney General Ken Paxton will plead not guilty to these accusations, and he will demand a trial by jury,” Paxton lawyer Joe Kendall said afterward. “He is looking forward to the opportunity to tell his side of the story in the courtroom.”

Democrats called for Paxton to step down, while Republican leaders asked the public to let the legal process play out.

The grand jury indictments against Paxton, unsealed shortly after noon, revealed that two first-degree fraud charges were based on Paxton’s efforts in July 2011 — when he was a member of the Texas House — to sell stock on behalf of Servergy Inc., a privately held, McKinney-based tech company.

According to the indictments, Paxton failed to tell stock buyers — including state Rep. Byron Cook, R-Corsicana, and Florida businessman Joel Hochberg, who each purchased more than $100,000 in Servergy stock and were listed as complainants on the fraud charges — that he had been compensated with 100,000 shares of Servergy. Paxton also said he was an investor in Servergy when he had not invested his own money in the company, the charges indicated.

Cook did not immediately return a call for comment Monday.

Paxton encouraged investors to put more than $600,000 into Servergy, special prosecutor Kent Schaffer told The New York Times last week. Paxton’s role was discovered as part of a Texas Rangers investigation, Schaffer said.

First-degree felonies can be punished by up to life in prison.

A third charge, a third-degree felony, accused Paxton of acting as an investment adviser representative in July 2012 without registering with the State Securities Board.

Paxton, sworn in as attorney general in January, is not required to leave office while he fights the charges, and Kendall said his client returned to Austin after being booked “to focus on his work on behalf of the citizens of Texas.”

Texas Democratic Party Chairman Gilberto Hinojosa said Paxton should step down immediately.

“He needs to spare Texas the embarrassment of a drawn-out legal fight in the public eye, take responsibility and accept the consequences,” Hinojosa said. “It is time to restore the public trust. It is time for a Republican to finally act responsibly.”

Texans for Public Justice, an Austin-based liberal watchdog group that filed a criminal complaint against Paxton last year, also called for Paxton’s resignation.

“He’s abused the faith in his public office and, according to the indictments, he’s engaged in outright deception for his personal profit, and that’s why we think he should step aside,” Director Craig McDonald said.

The Republican Party of Texas criticized the “sloppy process” that led to the indictments against one of the party’s statewide leaders, saying Paxton “deserves to have his say in a court of law rather than be judged in a court of public opinion.”

“Since being overwhelmingly elected by the voters of Texas, (Attorney) General Paxton has helped lock up child predators, investigated the odious acts of Planned Parenthood, relentlessly pushed back against an overreaching federal government, and we expect him to fight these allegations with that same zeal,” party spokesman Aaron Whitehead said.

Leading Republicans, including Gov. Greg Abbott and Lt. Gov. Dan Patrick, stopped short of defending Paxton, issuing statements Monday reminding voters that the indictments and arrest were the first steps in a long legal process.

“It is important to recognize that an indictment is not a conviction. Under our Constitution, every person is innocent until proven guilty,” Patrick said.

Paxton’s mugshot, showing him with a half-smile, was quickly released to the public — drawing inevitable comparisons to booking photos of then-U.S. House Majority Leader Tom DeLay, who chose a wide smile in 2005, and then-Gov. Rick Perry, who wore a genial smile last year.

The arraignment — when the charges will be read aloud and Paxton will enter his plea — will take place in the coming weeks.

Kendall said he and Paxton will follow instructions from state District Judge George Gallagher, a Fort Worth Republican and 15-year judge appointed to handle Paxton’s case, who has asked prosecutors and defense lawyers to “make no further public comments or publicly speculate on events.”

The two appointed special prosecutors, Houston defense lawyers Brian Wice and Schaffer, were not in Collin County and declined to comment Monday.

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