Ken Paxton moves one step closer to trial on long-delayed securities fraud charges

Suspended Texas Attorney General Ken Paxton sits as he makes an appearance during his eight-year-old felony securities fraud case against him at Harris County Courthouse on Thursday, Aug. 3, 2023 in Houston.
Suspended Texas Attorney General Ken Paxton sits as he makes an appearance for the eight-year-old felony securities fraud case against him at Harris County Courthouse on Thursday, Aug. 3, 2023 in Houston. Credit: Courtesy of Elizabeth Conley/Houston Chronicle

Impeached Attorney General Ken Paxton moved a small step closer to trial Thursday on long-delayed felony securities fraud charges, though both sides agreed his Senate impeachment trial looms large as a factor.

Meeting briefly in a Houston courtroom with a new judge in the case, defense lawyers and prosecutors agreed Thursday to return Oct. 6 to deal with pending motions and set a trial date for the 2015 charges alleging that Paxton violated state securities laws in private business deals earlier in the decade.

“At some point it has to come to an end,” special prosecutor Brian Wice told reporters afterward. “I think today was the first step in a journey of a thousand miles to make sure that justice ultimately comes to be.”

Paxton attended the short pretrial setting before state District Judge Andrea Beall. He sat in the front row but did not speak.

Another special prosecutor, Kent Schaffer, said he anticipated a trial date “probably early in the winter, probably around February.” But both sides agreed they needed to first see the result of Paxton’s impeachment trial before the state Senate. Lt. Gov. Dan Patrick has said he expects the trial, set to begin Sept. 5, will take up to three weeks.

“I think the consensus was we figure out what happens at the impeachment trial and we go from there,” Paxton lawyer Dan Cogdell told reporters afterward. “Either way, we’ll be back here in early October.”

Houston, Texas: Special prosecutors Brian Wice and Kent Schaffer talk to the media August 3, 2023 at  in Houston, Texas. Mark Felix/The Texas Tribune
Special prosecutors Brian Wice and Kent Schaffer talk to the media at the at Harris County Courthouse in Houston August 3, 2023. Credit: The Texas Tribune

If Paxton loses the impeachment trial — and is permanently removed as attorney general — he is more likely to seek a quicker resolution in the securities case, both sides agreed.

Paxton was indicted on securities fraud charges months after he first took office in 2015. The case has been delayed for years by pretrial disputes initiated by defense lawyers and prosecutors.

The latest of those fights was settled in June when Texas’ highest criminal court ruled that Paxton’s trial will remain in Houston, overruling lower courts that had transferred the matter back to Collin County. Prosecutors succeeded in moving the case from Collin County in 2017, arguing that they could not get a fair trial in the county Paxton represented for 10 years in the Texas House and two years in the Senate.

Settling the venue dispute moved Paxton closer to trial, though other pretrial disagreements, such as how much back pay is owed to the special prosecutors, remain pending and were not resolved Thursday.

Both sides agreed to take up those matters at the Oct. 6 hearing before setting a trial date. In addition to the pay issue, Paxton’s lawyers said they have a motion for a speedy trial that has been pending for years.

The hearing came about a month before Paxton is scheduled to begin an impeachment trial in the Texas Senate. The House impeached him in late May, accusing him of a yearslong series of misconduct and lawbreaking, most of it centered on his relationship with an Austin real estate investor and campaign donor, Nate Paul.

Paxton was suspended from office upon impeachment. The Senate trial will determine whether he is permanently removed from office.

Four of the 20 articles of impeachment deal with the criminal case and related issues, but the Senate has agreed to conduct a trial on the other articles first.

Paxton has long denied wrongdoing in the securities fraud case, and he has blasted the impeachment as politically motivated. His lawyers filed a motion with the Senate on Monday seeking to dismiss all but one article of impeachment, arguing that he cannot be impeached for conduct alleged to have occurred before his current term in office began in January 2023.

In the criminal case, Paxton faces two counts of securities fraud, a first-degree felony with a punishment of up to 99 years in prison, stemming from his 2011 efforts to solicit investors in Servergy Inc. without disclosing that the McKinney tech company was paying him to promote its stock. Paxton also faces one count of failing to register with state securities regulators, a third-degree felony with a maximum of 10 years in prison.

The judge, Beall, required Paxton to appear for Thursday’s hearing. Cogdell said he was fine with that, noting Paxton’s “not special.” But Paxton used a special entrance to access the courtroom, which Cogdell said he advised Paxton to do because of the gag order barring comments on the impeachment trial.

Speaking with reporters after the minutes-long hearing, both sides agreed that the outcome of the impeachment trial could affect the securities fraud case.

“Logically, if Ken prevails, we’ll go forward,” Cogdell said. “If Ken loses, that’s a kill shot to his political career, so it opens the door to a resolution that’s not open right now.”

Asked what that resolution could be, Cogdell replied, “Dismissal, settlement, resolution — who knows.”

Another wrinkle could be the U.S. Department of Justice investigation into whether Paxton abused his power to help Paul. Cogdell told the judge he understands the investigation is “ongoing” but told reporters afterward he thinks it “will go nowhere at the end of the day because I’m familiar with the facts.”

Regardless, both sides were pleased the case appeared to be finally moving again — and the courtroom appearance was full of playful reminders. When Beall noted this was the oldest case on her docket, one of the lawyers feigned surprise. And while discussing discovery, one of the prosecutors said the case is so old that when they previously turned over evidence, it was on CDs.

The prosecutors’ pay has been a persistent side issue in the case.

It dates back to the early months of the case in 2015, when Paxton lawyers challenged the $300-an-hour fee — approved by the judge in the case — as excessive but were unsuccessful. A Paxton supporter, Jeff Blackard, followed with a lawsuit arguing that Collin County was paying the prosecutors too much, and county commissioners balked at the fee arrangement and voted against paying the prosectors.

The issue eventually reached the Texas Court of Criminal Appeals, which in 2018 struck down the fee agreement, ruling that it violated state law and Collin County rules — but the court also ordered a new payment schedule to be adopted that complies with the law.

In 2019, the prosectors filed a motion asking the Harris County court to set a payment plan in accordance with the ruling, but that motion has languished without resolution.

On Thursday, Wice noted that the prosecutors had not been paid since January 2016. He said they were “cautiously optimistic” that the issue would be resolved at the Oct. 6 hearing.

Both Wice and Cogdell agreed that Collin County would remain responsible for the payments.

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