Texas AG Looks Forward to Jury Trial in Criminal Securities Case

AP File Photo/Eric Gay

The highest criminal court in the Lone Star State has declined to hear the securities fraud case against Texas Attorney General Ken Paxton. A spokesman for Paxton said that the Attorney General is looking forward to going to trial before a jury.

A federal court judge dismissed the civil securities law case for damages against Paxton less than one week ago.

The burden of proof of the prosecution in the criminal case is much more onerous–beyond a reasonable doubt–than that which must be proved in a civil securities fraud case.

Paxton was indicted by a Collin County grand jury last summer for two counts of securities fraud and one count for failing to register with the Texas State Securities Board. Breitbart Texas has reported about the substance of the charges, the parties and witnesses involved, and the re-indictments after special prosecutors asked for a dismissal of two indictments. The charges against the Texas Attorney General are felonies.

The criminal case against Paxton is separate from the civil action for damages filed by U.S. Securities and Exchange Commission.

As reported by Breitart Texas on October 7th, Judge Amos L. Mazzant, III (an Obama appointee) dismissed the civil securities fraud case against Paxton. He wrote in his order, “This case is not about whether Paxton had a moral obligation to disclose his financial arrangement with Servergy to potential investors. This case is also not about whether Paxton had some general obligation to disclose his financial arrangement to his investor group. The only issue before the Court is to determine whether the facts as pleaded give rise to a plausible claim under federal securities laws. With that limitation in mind, the Court has determined that under the facts pleaded by the Commission, Paxton did not have a legal obligation to disclose his financial arrangement.” The judge conditionally dismissed the case saying he would allow the federal government to amend the complaint with additional facts if they find them. The government has until October 21 to amend the federal complaint.

In the criminal case, lawyers for Paxton filed applications for writ of habeas corpus which have been denied in lower court and intermediate appellate proceedings. These writs were also the subject of the appeal denied at the Texas Court of Criminal Appeals. Houston lawyer Philip Hilder told Breitbart Texas that the issues raised “did not go to the merits of guilt or innocence, rather to the timing of raising pre-trial issues not being ripe for decision.”

Paxton’s lawyers had also challenged the formation of the grand jury that returned all three indictments. They argued that the trial court judge, Judge Chris Oldner acted beyond the scope of proper legal authority by asking potential grand jurors during the jury selection process for those who would be “willing to serve” and “volunteer.” The judge told potential grand jurors he wanted “to save everybody a little time.”

Collin County Judge Chris Oldner, recused himself from the case on July 29, 2015, after his wife Cissy Collier Oldner, was reported to be communicating about the Paxton indictments that were still under court seal. As reported by Breitbart Texas, the alleged breach of grand jury secrecy by the judge resulted in his wife’s discussing the grand jury’s indictment with Susan Fletcher, a Collin County commissioner.

Hilder told Breitbart Texas at the time, “These criminal charges came out of a specially-selected grand jury that allege a crime that does not even exist under law.” Another legal argument made by Paxton’s lawyers was that the statute under which Paxton was charged, i.e., the law that relates to allegedly acting as an unregistered investment adviser representative, was unconstitutionally vague and preempted by federal securities laws. They had also argued that the intermediate appellate court in Dallas erred in holding that the statute under which Paxton was charged does not require a culpable mental state. They argued that the securities law statute requires a guilty mindstate if he was required to register and did not register, and that this issue could be procedurally through a pre-trial writ. The intermediate appellate court found that this argument could not be brought by a pre-trial writ of habeas corpus.

In a statement received by Breitbart Texas from Paxton lawyer Dan Cogdell after the Texas Court of Criminal Appeals’ denial of review, he said “We are disappointed with the Court of Criminal Appeals’ decision, but we stand ready to prove in state court what U.S. District Judge Mazzant told us in his dismissal last week–that General Paxton did nothing wrong. The securities fraud allegations in the recently dismissed SEC case mirror those in the state criminal case. Moreover, the special prosecutors’ burden of proof in the criminal case is far greater than that of the SEC case.”

Special prosecutors contend that the dismissal of the federal civil securities fraud case has no bearing on the state criminal court case. Legal experts have said this is not necessarily the case.

A well-known Houston-based criminal defense lawyer, Troy McKinney of Schneider and McKinney P.C. told the Houston Chronicle that while the federal judge’s dismissal of the civil case does not guarantee an identical conclusion of the criminal case, the dismissal by the federal judge shows “a clear signal into the weaknesses” of the criminal case.

McKinney added, “I think it’s extremely hard to believe there could be a criminal offense when a civil court has already thrown out civil charges. Civil charges are much less severe, and if they can’t even make that burden, it’s hard to believe they could make a criminal case against him.”

A former SEC prosecutor, now criminal defense attorney John Teakell told The Dallas Morning News, “The prosecutors are going to have to go back and question whether they can really prove something. What they’ll really have to worry about is convincing a jury.” Teakell noted that the burden of proof in a civil case is lower than the burden of the prosecution in a criminal case. He was reported to say that if the SEC did not have sufficient evidence to urge in its federal complaint, prosecutors in the state criminal court case probably would not have the evidence they need to secure a conviction.

Brian Wice one of the special prosecutors appointed over Paxton’s case responded to the Texas Court of Criminal Appeal’s denial of review of Paxton’s appeal, “Today’s ruling marks an end to Mr. Paxton’s almost year-long attempt to avoid being judged by a jury of his peers. We look forward to going to trial and seeking justice on behalf of the people of Texas.”

As reported by Breitbart Texas in April 2015, Houston attorneys Kent Schaffer and Brian Wice were appointed to serve as Collin County Criminal District Attorneys Pro Tem. Texas State District Court Judge Scott J. Becker, Local Administrative Judge for Collin County, Texas, issued the Order as a result of the decision by the Collin County Criminal District Attorney to recuse himself.

Brian Wice represented former U.S. House Majority Leader Tom Delay in the successful appeal of his conviction. Wice also represented NFL player Adrian Peterson in a high-profile child abuse case along with attorney Rusty Hardin. Peterson pleaded no contest for spanking his son with a tree switch. Wice also serves as a legal analyst for KPRC-TV in Houston.

Kent Schaffer has been a criminal defense lawyer for over 30 years and has represented business and political figures such as former Houston Mayor Fred Hofheinz, U.S. Congressman Craig Washington, Robert Allen Stanford, and a variety of entertainers and athletes. Schaffer began his legal career as an investigator for the legendary criminal defense lawyer Richard “Racehorse” Haynes.

Paxton pleaded not guilty to indictments that many have called a political witch-hunt, as reported by Breitbart Texas. The issue of whether Paxton had failed to register as an investment advisor representative was raised by Dan Branch, Paxton’s opponent in the Republican Party primary for attorney general. Rep. Bryon Cook (R-Corsicana) and businessman Joel Hochberg are complaining witnesses in the indictments. Cook is chairman of the powerful State Affairs Committee and is said by opponents to be a close lieutenant to Speaker Joe Straus. Hochberg is a close business associate of Chairman Cook. Paxton ran against Straus as speaker before he was a Texas state senator.

After Paxton beat Dan Branch in the primary runoff election, a left-of-center “watchdog” group associated with requests for investigations and indictments against then-Governor Rick Perry, and former U.S. House Majority Leader Tom Delay, asked the Travis County District Attorney’s Office to investigate then-Republican Party AG nominee Paxton. The executive director of Texans for Public Justice sent a letter to the Travis County DA asking for an investigation three months before the November 2014 elections. The Austin-based nonprofit is funded by the Rockefeller Family Fund and a foundation whose top political recipient was reported to be the Ready for Hillary PAC.

The case is being tried in Collin County, Texas.

Lana Shadwick is a contributing writer and legal analyst for Breitbart Texas. She has served as a prosecutor and associate judge in Texas. Follow her on Twitter @LanaShadwick2.


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