The state’s highest criminal court on Wednesday rejected Texas Attorney General Ken Paxton’s request to dismiss securities fraud charges against him, setting the stage for a trial that could begin as early as spring.
The Court of Criminal Appeals’ decision to refuse Paxton’s case, delivered without comment, was a severe setback to Paxton’s pretrial attempts to toss out three felony charges linked to private business deals from 2011 and 2012, when he was a member of the Legislature.
Defense lawyers, arguing that the charges against Paxton lacked merit, said they will ask the court to reconsider its decision.
“We anticipate filing a motion for rehearing because we have tremendous confidence in our case,” Paxton lawyers Philip Hilder and Bill Mateja said in a written statement.
The appeals court, however, rarely grants requests to rehear a rejected appeal, and prosecutors said Wednesday that they were preparing for an as yet unscheduled trial in Collin County.
“Today’s ruling marks an end to Mr. Paxton’s almost yearlong attempt to avoid being judged by a jury of his peers,” prosecutor Brian Wice said. “We look forward to going to trial and seeking justice on behalf of the people of Texas.”
A Collin County grand jury last year indicted Paxton on two securities fraud charges accusing him of touting Servergy Inc. without revealing to potential investors that the McKinney tech company was paying him to push its stock. The first-degree felonies carry a penalty of up to 99 years in prison, though probation is common for many first-time, white-collar convictions.
A third charge accused Paxton of failing to register with state securities regulators, a third-degree felony.
A conviction for any felony would require Paxton to step down as attorney general, the top lawyer for state government.
The legal setback came five days after Paxton prevailed in civil court when a federal judge dismissed a lawsuit by the U.S. Securities and Exchange Commission that accused Paxton of fraud in his dealings with Servergy investors.
U.S. District Judge Amos Mazzant III said the SEC’s allegations weren’t recognized under federal securities law, which he said didn’t require Paxton to disclose his deal with Servergy. The decision had no effect on the criminal charges against Paxton.
Mazzant gave the agency until Oct. 21 to amend its lawsuit if it can find “additional facts” to support its accusations. The SEC — which was seeking fines and an order for Paxton to repay “ill-gotten gains” from the Servergy deals — also could appeal Mazzant’s decision.
According to the SEC’s lawsuit, Paxton secured $840,000 in Servergy investments from five people, including state Rep. Byron Cook, R-Corsicana, and received 100,000 shares of private Servergy stock, worth $1 each, in compensation for his recruiting efforts.
In the criminal case, Paxton’s lawyers told the Court of Criminal Appeals that he shouldn’t have to stand trial on the charges because he was indicted in 2015 by a Collin County grand jury that was improperly formed by a state district judge.
In addition, defense lawyers argued that Paxton couldn’t be charged with failing to register with state regulators because the law is unconstitutionally vague and because he was representing a company that had registered with the SEC, superseding his need to register with the state.
Paxton’s trial judge and the Dallas-based 5th Court of Appeals rejected versions of those arguments during previous attempts to dismiss the indictments.
Lawyers for Texas Attorney General Ken Paxton said they will ask the Court of Criminal Appeals to reconsider its decision. The court rarely grants requests to rehear a rejected appeal, however, and prosecutors said they were preparing for a trial as early as the spring.