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Wednesday, May 22, 2024 | Back issues
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Ex-CEO Wants Legal Fees From Paxton Probe

LAS VEGAS (CN) - The founder and former CEO of data security tech firm Servergy sued the company for $149,000 - his legal costs from a criminal investigation of Texas Attorney General Ken Paxton's ties to the company.

William E. Mapp III claims he "incurred and continues to incur attorney's fees and expenses and may in the future incur other liabilities" from an SEC investigation of Servergy and the "grand jury proceedings and criminal indictment of Texas Attorney General Ken Paxton."

Paxton is fighting felony charges which, if successful, could send him to prison for life.

His attorneys on Tuesday tried to persuade a Tarrant County judge to dismiss the charges. The Collin County judge who originally handled the case recused himself because he oversaw the seating of the grand jury.

The charges date back to 2011, when Paxton was a member of the Texas House of Representatives. He was elected attorney general last year and began his term in January.

The Texas State Securities Board fined Paxton $1,000 last year after he admitted he had solicited clients for a friend's investment firm, Mowery Capital Management, while he was a state senator, without being registered as an investment adviser. Paxton paid the fine and was reprimanded.

The criminal charges came from a Texas Rangers investigation that began after the slap on the hand from the Securities Board. A first-degree felony carries a sentence of 5 to 99 years or life in state prison; a third-degree felony is punishable by two to 10 years in state prison.

A Collin County grand jury in July charged Paxton, a Republican from McKinney, with two first-degree felony counts of securities fraud and a third-degree felony count of failing to register with the Texas State Securities Board.

In a separate matter, the SEC in 2014 filed a lawsuit accusing Servergy and Mapp of making "fraudulent statements or omissions related to Servergy's technology and purported business ties." Paxton lives in McKinney, and the Collin County grand jury subpoenaed Mapp to appear before it on July 28

Though based in McKinney, Servergy is incorporated under Nevada law. It describes itself on its website as a "technology solutions integration company focused on data security."

Mapp says he hired the Greenberg Traurig law firm in Las Vegas to represent him in both matters, and state law allows a Nevada-based corporation to advance expenses, including attorney's fees, incurred by an officer.

Servergy's bylaws require it to advance money to officers who are defending civil or criminal actions for activities done on the company's behalf and in a "covered capacity" and defending a civil or criminal action, Mapp says in the Dec. 1 complaint in Clark County Court.

Mapp says he asked Servergy to advance him $103,925 in September for legal expenses already incurred, and another $45,000 for anticipated legal costs over the next three months. Servergy refused.

Mapp resigned as CEO in September 2014 and resigned his post as chairman of the board on May 1 this year. He says Servergy is obligated to advance him the money.

He wants the $149,000 and an injunction ordering Servergy to pay legal costs in the future, plus punitive damages for bad faith and breach of contract.

His attorney Kirby Smith, of Las Vegas, and could not be reached by telephone on Wednesday.

Servergy officials did not return a call seeking comment.

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