AUSTIN (CN) - The Texas Ethics Commission narrowly rejected an advisory opinion that would have allowed embattled Texas Attorney General Ken Paxton to use out-of-state donations to defend himself on felony securities fraud charges.
The eight-member commission voted 4-3 in favor of the advisory opinion on Monday, but five votes were necessary for approval.
Issued in November 2015, the advisory opinion explained how one of Paxton's employees can avoid violating state gift-giving laws by accepting a "benefit"
from a donor with no ties to Texas, who is not subject to the agency's jurisdiction. Paxton is barred from using Texas taxpayer money or campaign contribution to cover his legal fees.
The opinion reasoned that accepting a benefit would not break the law if a diligent records search was conducted, the donor is contacted to establish "identity and circumstances," and the state official is "unaware of any substantial risk the donor is subject to jurisdiction of the public servant of" Paxton's office.
Paxton is accused of fraudulently selling more than $100,000 in Servergy stock to two investors in July 2011 without disclosing 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 Collin County grand jury indictment.
He was indicted in July 2015 on two first-degree felony counts of securities fraud and a third-degree felony count of failing to register with the Texas State Securities Board. He faces from five to 99 years of life in state prison if convited on the securties fraud charges and from two to 10 years in state prison on the failure to register charge.
Craig McDonald, director of the watchdog group Texas for Public Justice, testified before the commission Monday and urged the commission to not issue state officials an "ethical blank check." He said the advisory opinion allows the gifts "even if Paxton fails to vet conflicts properly and if a donor lies to Paxton about the conflicts posed" through the gifts.
"This proposal opinion knowlingly invites fraud and corruption," McDonald said. "There is an ethical way for Paxton to let others pay his legal bills. He should resign from office."
Paxton's criminal defense attorneys said Monday that they are not "troubled" by Paxton's ability to pay their legal fees.
"We assumed responsibility in his case because we believe in his defense," the attorneys told the Fort Worth Star-Telegram. "This ruling doesn't change our commitment."
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