This Trib story delves into the life and times of Nate Paul, the young Austin real estate entrepreneur whose relationship with Ken Paxton is the underpinning of the current scandal surrounding Paxton. The story goes into some detail about Paul’s life, which includes a habit of stiffing creditors and a general dickishness that I find crummy but which apparently don’t bother Paxton, but the key bit is right here:
Best mugshot ever
Meanwhile, Paxton’s office has come to Paul’s defense in at least one other legal matter, records show. Paul’s World Class firm works through a complex web of more than a dozen affiliated business partnerships, which jointly own properties with investors.
A dispute arose two years ago between companies affiliated with World Class and the Roy F. and Joann Cole Mitte Foundation, which invested in multiple Austin properties with the companies. The foundation is an Austin-based nonprofit that provides grants to charitable organizations and academic scholarships for students with financial needs.
The Mitte Foundation sued Paul in 2018, claiming he wasn’t sharing financial information on their jointly owned investments that Paul’s businesses managed. The case went to arbitration, and on July 1, 2019, a company affiliated with World Class agreed to buy out Mitte’s interest in the real estate partnerships for $10.5 million with payment due that August.
It never came, said Ray Chester, the lawyer representing the Mitte Foundation in the case.
In October 2019, the judge in the case ordered a receiver to take over the business partnerships, which would compel Paul to reveal the financial records that Chester said still hadn’t been shared with the Mitte Foundation. Chester said that within days, Paul “blatantly defied” the arbitrator’s ruling and said he had sold the partnerships at less than half of their market value.
But the sale was to another company affiliated with Paul, Chester said.
“He basically sold it to himself at below market value,” Chester said, although court records show the sale was never consummated.
As Paul’s firm cycled through teams of attorneys and held back on making the $10.5 million payment, Paxton’s office intervened in the case on behalf of World Class and its business affiliates this June, court records show. Paxton argued that his office needed to “protect the interests of the public” because the suit involved a charitable trust.
In July, Paxton asked a judge to halt the case. During that time, Chester said Paxton’s office called him five to 10 times per day to try to get him to settle for “pennies on the dollar,” calls that Chester characterized as “vaguely threatening.”
On Sept. 20, less than two weeks before news broke about the allegations against Paxton, the attorney general’s office reversed itself and announced its intention to step away from the case, which is still ongoing.
After filing for bankruptcy in August, the World Class affiliate handling investments in the property did not pay the $10.5 million or turn over the records, Chester said. But a clause in the settlement agreement does allow the Mitte Foundation to take a valuable, larger ownership share in the downtown property, Chester said.
One can certainly see some parallels to another well-known real estate personality, but that’s not what caught my interest. The obvious question here is why was Ken Paxton inserting himself into this particular dispute? It sure seems like a standard fight between a creditor and a debtor, so what was the state’s interest? I didn’t publish this post on Thursday because of Too Damn Much Other News, which is just as well because I then saw this Statesman story, which helped with some of these questions. As noted above, Ray Chester is an Austin attorney who has been representing the Mitte Foundation in its legal battles against Nate Paul and World Class, and apparently also Ken Paxton.
Chester contends the attorney general’s office exerted undue pressure to push for a settlement financially advantageous to Paul — or “pennies on the dollar” compared with what the foundation was owed under a previous $10.5 million settlement reached in 2019.
“We suspected all along that something fishy was behind the AG’s intervention in our case,” Chester said. “There is no legitimate reason why they would be helping Mr. Paul’s companies at the expense of a charity.”
The limited partnerships are called WC 1st and Trinity LP and WC 3rd and Congress LP, named after the locations of their properties. The 1st and Trinity partnership owns prime waterfront land on East Cesar Chavez, next to the Four Seasons Hotel and across from the Austin Convention Center. The WC 3rd and Congress partnership owns several tracts around the Austonian high-rise condos downtown.
In court documents and in an interview with the Statesman, Chester said Paul didn’t pay the $10.5 million settlement.
And as things continued to “go south” for Paul, Chester said Paxton started taking an interest in the legal fight.
Any time a charity is involved in litigation, the charitable trust division of the attorney general’s office must be notified because it has a right to intervene on behalf of the public interest in the charity.
But the only reason the attorney general should get involved in such cases “is to help the charity — not help the criminal guy against the charity,” Chester said. “And that’s what happened here, and that’s what’s made it so unusual.”
Michael Wynne, an attorney for Paul, told the Statesman that the foundation “refused to engage in any meaningful resolution” to the litigation, however, and also “colluded” with a court-appointed receiver in the case, squandering “over a million dollars in legal fees to line their lawyers’ pockets.”
Those are the among the reasons Paul brought the case to the attention of the attorney general’s charitable trust division, he said, disputing a contention by Chester that Chester’s office did so when the lawsuit was first filed — as it was required to do by law.
Wynne also said he is unaware of anyone from the attorney general’s office attempting to pressure Mitte to accept a settlement.
“We were obviously not privy to any of those conversations and have no basis to comment on them,” he said.
This at least helps me understand the claim that the AG needed to step in because the case involved a public trust. I’d love to hear from someone with actual experience what they think about all this.
Paxton mounted an investigation into allegations made by Paul that federal agents with the FBI and U.S. Department of Treasury acted unlawfully during [2019 searches of some of his properties]. Paxton tapped an outside attorney, Houston lawyer Brandon Cammack, to conduct that probe.
Seven senior Paxton aides — including his first assistant, who recently resigned — subsequently filed a criminal complaint against the attorney general that they say stems from his dealings with Paul, who donated $25,000 to Paxton’s reelection campaign in 2018. They’ve asked federal agents to investigate their boss for potential crimes that include bribery, abuse of office and improper influence.
Cammack’s appointment was among the actions that prompted the complaint. Paxton’s intervention in the Mitte case also has sparked controversy.
A senior official in the attorney general’s office recently voiced concerns to the American-Statesman about Paxton’s involvement in the Mitte lawsuit, saying attorneys in the agency’s charitable trust division were instructed by Paxton to weigh in, even though Paxton doesn’t typically take such a hands-on approach.
“I saw just no interest why our office should get involved in this thing,” the official said. “Legally, and just the optics of doing something for a guy who is under FBI investigation — I am like, ‘This is reckless.’”
Documents obtained by the Statesman indicate Paul prodded some staffers of the attorney general’s office to discuss with him their handing of the Mitte case and what Paul alleged to be improprieties by the foundation.
“Your decision to not even respond to my emails has only amplified my concern about your bias toward helping the Mitte Foundation,” Paul wrote in a July 1 email to Josh Godbey, head of the attorney general’s charitable trust division. “I have raised many issues and you have chosen not to respond.”
In a July 23 email, Paul complained to Jeff Mateer — Paxton’s former first assistant who recently resigned — about Godbey’s lack of action. Mateer responded to Paul’s attorneys, asking that all communications be conducted through them, and he also attempted to make clear the agency’s position on such matters.
“It is not our role to assist a party adverse to a charity in pending litigation or provide status updates on those matters,” Mateer wrote in a July 24 email. “Any such non-privileged communications subject to public disclosure might be perceived as questioning our office’s necessary impartiality, which we carefully guard at all times.”
Chester said his firm notified Paxton’s office about the lawsuit as required when it was filed, but was told the agency’s involvement wasn’t needed.
“A junior attorney called me, asked me a few questions and said, ‘You’re fine, we don’t need to intervene,’” Chester recalled.
That was the end of it, he thought.
But subsequently, Paul suffered a series of setbacks in the case. In addition, the court-appointed receiver started making plans to sell the 1st and Trinity property.
“The next thing you know, (the attorney general’s office) intervened,” Chester said. “At that point, we knew there was some connection between Nate and the attorney general’s office.”
“We quickly started getting pressure to settle the case,” Chester said, and “for much less” than the 2019 agreement of $10.5 million.
“They were strong-arming us to settle,” Chester said. “It was very uncomfortable and very threatening. Multiple people told me the pressure was coming straight from Paxton.”
There’s been a lot more reporting on this saga, which I have covered in another post. This is going to be a challenge to follow because multiple publications are all chasing different leads and advancing the story in a variety of ways. We still don’t have a clear picture of what was happening, and some facts are in dispute. But boy, everything we’ve seen so far looks deeply sketchy. I have no idea what Ken Paxton is thinking, but I suspect he’s in for some very rough times. And deservedly so.