Ken Paxton
When Attorney General Ken Paxton publicly admitted that he violated a state securities law last year, the State Securities Board was obligated by law to gather evidence against him and immediately refer it to prosecutors who could seek criminal charges.
But prosecutors in Travis and Collin counties said the securities regulators did not refer Paxton’s case to them, an apparent violation of requirements set by state law, the American-Statesman has confirmed.
In May 2014, when Paxton was a state senator running for attorney general in the Republican primary runoff, he accepted a reprimand and $1,000 fine from the State Securities Board, whose five members were appointed by former Gov. Rick Perry.
In that proceeding, Paxton admitted to soliciting clients for a Texas investment firm without registering as an investment adviser representative — a violation that can be prosecuted as a third-degree felony under the State Securities Act — and without disclosing that he would receive 30 percent of management fees.
But despite state law that required Securities Board Commissioner John Morgan to “at once” refer evidence of a criminal violation to the appropriate prosecutors — a standard that has been in place since 1957 — there is no evidence that securities regulators did so in the Paxton matter.
Robert Elder, a State Securities Board spokesman, said the agency would not comment.
In Collin County, where Paxton lived while soliciting investment clients three times between 2004 and 2012 as an unregistered adviser, prosecutors received no information about Paxton’s activities from the board, said Bill Dobiyanski, first assistant district attorney.
In addition, the Travis County Public Integrity Unit — which prosecutes corruption by public officials — did not hear from securities regulators about Paxton’s admission of violating securities law, said Gregg Cox, director of special prosecutions for the Travis County district attorney’s office, which includes the Public Integrity Unit.
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Allegations that the State Securities Board hadn’t followed the law were raised last week in a strongly worded letter sent to Wice and Schaffer by the director of the left-leaning Progress Texas PAC.
In a July 8 letter, Glenn Smith suggested that Gov. Greg Abbott, who was still attorney general at the time, also didn’t follow requirements set out in the Texas Securities Act.
“On the surface, those failures raise suspicions of widespread conspiracy among several agencies and officials aimed at minimizing the criminal exposure of Mr. Paxton,” wrote Smith in the letter, which he provided to the Statesman.
Cait Meisenheimer, an Abbott spokeswoman, declined to comment on Smith’s letter. Wice also declined to comment on the letter, and Schaffer could not be reached for comment.
In his complaint, Smith specifically names Texas Securities Commissioner John Morgan and Collin County District Attorney Willis.
“With something like this, which is a clear confession of a felony by Sen. Paxton, the sort of silence and inactivity of public officials was very suspicious to me from the beginning,” Smith said. “They were compelled to act and failed to act, and this deserves attention.”
See here, here, and here for the background on the State Securities Board stuff, and see the original Statesman story for a copy of the letter. It’s always the coverup that gets you, isn’t it? The State Securities Board, full of Rick Perry appointees, should have followed the law and done its duty. Attorney General Greg Abbott should have followed the law and done his duty. Collin County DA Greg Willis should have done his duty a lot more quickly and without having to be pushed into it. That’s hindsight for you. Now I really can’t wait till the special prosecutors start laying out their case to the grand jury.