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Texas AG Charged With Securities Felonies

McKINNEY, Texas (CN) - Texas Attorney General Ken Paxton was expected to surrender to be fingerprinted Monday morning on three felony securities charges that could send him to prison for life.

A Collin County grand jury charged Paxton with two first-degree felony counts of securities fraud and a third-degree felony count of failing to register with the state securities board, according to multiple sources, including The New York Times and the Dallas Morning News.

Paxton was expected to turn himself in this morning at the Collin County Courthouse.

The charges stem from 2011, when Paxton was a member of the Texas House of Representatives. He became a state senator in 2014 and was elected attorney general that November, when then-Attorney General Greg Abbott was elected governor.

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 new 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.

Special prosecutor Kent Schaffer said Paxton urged investors in 2011 to invest $600,000 into technology firm Servergy without telling them he would earn a commission on it, and misrepresenting that he was investing in the McKinney-based company.

Paxton is a Republican from McKinney, north of Dallas. Tarrant County Judge George Gallagher has been appointed to hear the case.

Paxton, an attorney, served in the Texas House from 2003 to 2013 and in the Texas Senate from 2013 until he became attorney general in January.

The Dallas Morning News reported this morning that the charges "could cost him, at least, his political career." The News cited Texas Republicans' deathly silence on the matter, in contrast to the noisy denunciations after then-Gov. Rick Perry was indicted on abuse of power charges one year ago.

Special prosecutor Schaffer said in July that the Texas Rangers found evidence that went beyond the admissions Paxton made.

"The Rangers went out to investigate one thing, and they came back with information on something else," Schaffer said in early July. "It's turned into something different than when they started."

The new allegations sparked a public war of words between the prosecutors and Paxton, who called Wice and Schaffer "inexperienced" and "politically motivated." He also complained that they are from Houston, though there are plenty of attorneys closer to Austin, the state capital.

"This appears to be a politically motivated effort to ruin the career of a longtime public servant," Paxton spokesman Anthony Holm said on July 2. "These attacks on Ken Paxton appear to have become a political hit job in the media, perhaps having the effect of inappropriately influencing the grand jury."

Holm said last week that the prosecutors had a "conflict of interest" because they defend clients from criminal charges. He said the Securities Board was "very clear" that Paxton had not committed a crime and that "we are only here because of liberal activists."

But Republicans have been silent since news of the indictments began trickling out Saturday. The Morning News said Paxton already faces significant problems: he was indicted by a grand jury in his overwhelmingly Republican hometown, the Texas Rangers are highly respected, and Paxton already has admitted to a civil charge in the case.

Schaffer denied that politics played any role in the indictment, saying he has "nothing personal" against Paxton based on his political views.

"Even if you found fault with Brian Wice or myself, how do you find it with the Texas Rangers?" Schaffer asked. "These are the most honest, straightforward, incorruptible police officers you're ever going to find. They don't have political motivations, and they certainly wouldn't have any against the sitting attorney general."

Paxton could not be reached for comment this weekend. The indictments, not surprisingly, brought criticism from Texas Democrats. State Rep. Chris Turner, D-Arlington, called it an "extremely serious" matter.

"As the top law enforcement official in Texas, AG Paxton owes the public a full, candid explanation for these charges, as well as an explanation of how he can continue to do his job as he deals with three felony indictments," Turner said in a statement.

Matt Angle, founder of the Fort Worth-based political action committee Lone Star Project, said Paxton has "forfeited" any right he may have to benefit of the doubt.

"Ken Paxton is going to be spending the next many months trying desperately to stay out of jail," Angle said in a statement. "Paxton has been indicted for swindling other Texans out of their hard-earned money."

Paxton has at least one ally, in state Rep. Matt Krause, R-Fort Worth.

"Unfortunately, Texans have seen indictments used as political weapons," Krause said in a statement. "As recently as last week, an indictment was thrown out against former Gov. Rick Perry. It's easy to envision the same thing happening here."

A Texas appeals court on July 24 dismissed one of two felony abuse of power charges against Perry. A three-judge panel on the state's Third Court of Appeals dismissed the coercion of a public servant charge, but not the charge of abuse of official capacity.

Those charges stemmed from Perry's issuing a line-item veto against a Democratic district attorney who had been charged with drunken driving.

Texans for Public Justice, a government watchdog, demanded a criminal investigation after the Securities Board's fined and reprimanded Paxton.

Travis County District Attorney Mary Lehmberg's Public Integrity Unit - whose funding Perry had vetoed - referred the case to Dallas and Collin counties.

After Dallas County District Attorney Susan Hawk declined to pursue the case and Collin County District Attorney Greg Willis asked to be recused, Wice and Schaffer were appointed as special prosecutors.

Texans for Public Justice demanded Paxton's resignation on Saturday, saying it is the "only acceptable response" to the indictment.

"The state's highest law enforcement officer must be held to the highest standards of conduct," the group said in a statement "Ken Paxton's behavior disqualifies him from serving as Texas' top cop."

Paxton's attorney Joe Kendall, a former federal judge, told the Morning News: "Judge Gallagher has specifically instructed both parties to refrain from public comment on this matter, and we are honoring the judge's instructions."

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