AUSTIN, Texas — Frederick Mowery, a business associate of Texas Attorney General-elect Ken Paxton, faces the loss of his securities license as part of an ongoing investigation into how Mowery’s firm solicited clients, including allegations that he falsified and backdated documents related to his requirements to disclose his referral fee arrangements with Paxton. Paxton is not mentioned by name in the documents filed by the Texas State Securities Board (SSB) against Mowery, but the specific allegations against Mowery appear to describe conduct related to their business relationship.
The SSB issued a Notice of Hearing on Tuesday, requiring Mowery to appear before an Administrative Law Judge on January 27, 2015, as reported by the Austin American-Statesman. The hearing will determine if Mowery and his company, Mowery Capital Management, LLC, should lose their registrations with the Securities Commissioner. Other potential consequences include an administrative fine and an order “to cease and desist order from engaging in fraudulent conduct.”
Paxton’s relationship with Mowery, who he has described as a friend and business associate, made headlines last May when the SSB issued a public reprimand and $1,000 fine against Paxton for improperly filed disclosure paperwork related to Paxton’s referral of clients to Mowery. Paxton was receiving a referral fee of thirty percent of management fees that Mowery collected from clients he referred.
The specific findings of fact by the SSB in the order against Paxton did not find any evidence of deceit or fraud, or any other conduct that would provide the basis for criminal charges, and the SSB did not refer the case to a District Attorney for prosecution. Paxton’s situation was helped by the fact that he self-reported the disclosure problems when he was made aware of it, and was not accused of making any false or misleading statements himself to the SSB.
That is not the case with Mowery, who is accused of a long list of wrongful acts, including “intentional failures to disclose” the required information, breaching fiduciary duties against clients (including some who were over the age of 65, which can trigger additional penalties meant to protect senior citizens from fraud and abuse), intentional misrepresentations, failure to disclose conflicts of interest, plagiarism of research, falsifying documents submitted to the SSB, and backdating other documents.
Contrary to some reports, Paxton was not under criminal investigation as a result of the SSB’s reprimand and fine. A District Attorney is still free to pursue a case against Paxton, but in the history of the SSB, no District Attorney has ever independently taken up the case when the SSB has issued a findings of fact that did not include a finding of criminal conduct and the case was not referred to a District Attorney.
Mowery has twenty days to respond to the allegations in the SSB’s Notice. His lawyer, Kevin Edmundson, told the Statesman that Mowery had “made appropriate disclosures of referral fee arrangements to his clients.” Edmundson added, “We deny the allegations and we look forward to presenting evidence at the administrative hearing.”
A spokesman for Paxton, Andrew Holm, spoke briefly to Breitbart Texas about the allegations against Mowery. “These matters need to be resolved through the appropriate legal process, and we are not versed on the substance of the allegations,” said Holm. Holm also confirmed that Paxton was not under criminal investigation at this time.
Follow Sarah Rumpf on Twitter @rumpfshaker
COMMENTS
Please let us know if you're having issues with commenting.