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TPJ files criminal complaint against Ken Paxton

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TPJ Calls for Formal Investigation of AG Candidate Ken Paxton – Criminal Complaint Filed With Travis County DA’s Office

TPJ has filed a criminal complaint with the Travis County District Attorney against State Senator and Attorney General candidate Ken Paxton. The complaint, filed on July 18, seeks a formal investigation into allegations that Paxton committed one or more felonies when, over several years, he failed to register as an investment adviser representative of Mowery Capital Management as the state securities law requires. Paxton previously admitted to state regulators that he solicited clients and was compensated for his services when he was not a registered agent. Paxton also admitted hiding the income he received on his state personal financial disclosures.

Here’s the letter they sent to DA Rosemary Lehmberg and Public Integrity Unit lead prosecutor Gregg Cox. It’s pretty straightforward so I’ll reproduce it here:

Dear Ms. Lehmberg and Mr. Cox,

I believe that Mr. Kenneth Warren Paxton, Jr. has committed one or more criminal felony offenses related to his activities as an investment advisor representative for Mowery Capital Management, LLC (MCM). I encourage your offices to investigate and, if warranted, appropriately prosecute Mr. Paxton for his felony criminal conduct.

The public record appears to be unambiguously clear that Mr. Paxton violated provisions of the Texas Securities Act in 2004, 2005 and 2012 by failing to register as an investment adviser representative of Mowery Capital Management as the law requires.

As widely reported in the media, on April 30, 2014, by sworn acknowledgement, Mr. Paxton admitted to conduct that violated the Texas Securities Act. His sworn acknowledgement resulted in Disciplinary Order No. IC14-CAF-03 entered against him on May 2, 2014 by Texas Securities Commissioner John Morgan.

By agreeing to the Disciplinary Order Mr. Paxton has acknowledged that he solicited clients for MCM and was compensated by MCM for each client he delivered. Mr. Paxton also acknowledged that he was not registered with the Texas Securities Board as a representative of MCM during 2004, 2005 and 2012 when he actively solicited clients and potential investors.

The Texas Securities Act prohibits a person from acting as an investment adviser representative for an investment firm in Texas unless the person is registered as a representative for that particular firm. The Texas Securities Act provides that any person who renders services as an investment advisor representative without being registered as required by
the Act is guilty of a felony of the third degree.

I therefore request that you fully investigate this matter and prosecute any violations if justified by the law and the facts.

Respectfully,

Craig McDonald
Director, Texans for Public Justice

See here and here for the background. That disciplinary order was little more than a slap on the wrist, unless this develops into something. There’s also an SEC complaint pending against Paxton. That’s an awful lot of baggage for a candidate to carry, and one imagines it will have to take a toll on him. I figure at least a few Dan Branch supporters are going to avoid voting for Paxton in November, though how many that may be is anyone’s guess. The one thing about all this that worries me is that once the Democratic District Attorney from Democratic Travis County gets involved, Paxton and his supporters can claim it’s all about partisan politics and that he’s the real victim here. He’s already traveling down that road. If there’s one thing that can overcome revulsion against an ethically-compromised candidate, it’s tribal identity. Still, the facts here are quite plain – Paxton signed legal documents stipulating to what he did – and for sure someone was going to file a complaint. Now we wait and see what Lehmberg and her staff make of it. The Statesman has more.

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