McKINNEY, Texas (CN) - Criminal defense attorneys for Texas Attorney General Ken Paxton on Tuesday urged a state judge to dismiss felony securities fraud charges against him because of alleged bungling by the previous judge in the case.
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. If convicted, he faces a possible life sentence.
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.
Tarrant County Judge George Gallagher is presiding over the case after Collin County Judge Chris Oldner recused himself because he oversaw selection of the grand jury that indicted Paxton.
Defense attorney Dan Cogdell, of Houston, criticized Oldner on Tuesday, claiming he'd entered the grand jury room and asked prospective jurors if they wanted to serve, and sent home those who did not.
"The harm of this case is that the conduct of Judge Oldner robbed this grand jury of randomness," Cogdell said. "He did not have discretion to recuse people who were not yet qualified."
Collin County Assistant District Attorney Gayle Leyko - a defense witness - testified that she saw Oldner enter the grand jury room during jury selection.
But under cross-examination by special prosecutor Kent Schaffer, Leyko said she saw no indication of bias by Oldner.
"Certainly, Judge Oldner was not trying to coach the grand jury or pick jurors who are anti-Ken Paxton, correct?" Schaffer asked.
"That is correct," Leyko answered.
"He chose it just like every other grand jury, correct?" Schaffer asked.
"Correct," Leyko said.
Paxton's attorneys also claim Oldner violated grand jury secrecy by telling his wife about the indictments before they were made public. His wife allegedly told a Collin County commissioner about them and told her to not discuss it because they were not public yet.
Special prosecutor Brian Wice downplayed that argument, telling the court no harm was done by Oldner informing his wife after the indictments were handed down.
Gallagher is not expected to rule on Paxton's motions to quash for several weeks. The judge said he will not rule until Paxton's attorneys respond to the prosecution's motions to amend the indictments.
Paxton is accused of fraudulently selling more than $100,000 in Servergy stock to two investors in July 2011 without disclosing that he would be paid commissions on it. He also failed to disclose that he had been given 100,000 shares in the company but had not invested in the company himself, according to the indictment .
The securities fraud charge is punishable by 5 to 99 years or life in state prison and the failure to register charge by 2 to 10 years.
The securities board fined Paxton $1,000 last year after he admitted he had solicited clients for a friend's investment firm, Mowery Capital Management, without being registered as an investment adviser. Paxton paid the fine and was reprimanded. The harsher criminal charges resulted from a Texas Rangers investigation that began after the board's findings.
Flanked by his wife and attorneys Tuesday, Paxton spoke publicly for the first time since his indictment outside of the courtroom.
"I appreciate the full and fair hearing by the judge and his attention to detail," Paxton said. "I appreciate my lawyers' great job in staying on the issues. I have confidence in the process, the people of this county and the truth."
Paxton's attorneys also attacked the indictments themselves, claiming that Paxton did not have to register with the securities board because federal law at the time did not require him to do so.
Defense attorney William Mateja, with Fish Richardson in Dallas, told the court the controlling state law is too "constitutionally vague," with requirements that are difficult to understand.
"This is a quagmire," he said. "How can anybody figure this out? It is an absolute mess."
Prosecutor Schaffer disagreed, pointing out that Paxton voted for the law when he was in the Texas House.
"He was one of 132 House members who helped pass it with bipartisan support with no opposition," Schaffer told reporters after the hearing. "The fact that he now claims that no one is able to discern its true meaning is kind of funny, I think."
On Monday, the Texas Ethics Commission delayed a decision on whether to approve guidance to Paxton's employees that would allow him to accept out-of-state donations to fund his defense.
Paxton is banned from using campaign funds to pay his legal fees in the case because the charges do not relate to his official duties.
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