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Texas AG Paxton Defends Taking $100K Gift

DALLAS (CN) — Embattled Texas Attorney General Ken Paxton on Wednesday denied that he violated the rules of his office when he accepted a $100,000 gift from the leader of a company being investigated for Medicaid fraud.

Paxton accepted the money last year from James Webb, head of Dallas-based Preferred Imaging LLC, though policies of the Texas Attorney General's Office prohibit employees from taking gifts from an entity "the employee knows is being investigated," The Associated Press reported Wednesday, providing a link to a copy of the policies.

The gift was part of $330,000 that Paxton, R-McKinney, raised in 2015 to cover his mounting legal bills.

The Department of Justice announced on July 22 that Preferred Imaging would pay $3.51 million to resolve a whistleblower's False Claims Act and Texas Medicaid Fraud Prevention Act claims that the company engaged in improper billing.

Preferred Imaging admitted no wrongdoing in the settlement. On July 22 federal prosecutors acknowledged the assistance of the Texas Attorney General's Civil Medicaid Fraud Division in their investigation.

On Wednesday, Paxton spokesman Marc Rylander denied that Paxton had violated his office's gift rule, saying that no investigation of the company had occurred because his office's unit "never received a referral."

Rylander told The Associated Press on Tuesday that federal prosecutors "took the lead" in the investigation and settlement and that Paxton was not involved.

Paxton faces a federal securities fraud civil suit from the SEC, which claims he raised more than $480,000 from investors in Servergy without disclosing that he was given 100,000 shares of stock in the company while he was a member of the Texas House of Representatives.

Paxton is awaiting a trial date on a separate, three-count felony securities fraud indictment in Collin County that largely mirrors the allegations in the civil suit. He faces from five to 99 years in state prison if convicted.

Paxton has denied the accusations in both cases, blaming his legal troubles on political enemies and President Barack Obama.

Paxton is prohibited from using campaign donations or taxpayer money to fund his criminal defense.

In February, the Texas Ethics Commission narrowly rejected an advisory opinion that would have allowed him to use out-of-state donations to fund his defense. If approved, the opinion would have allowed Paxton's employees to avoid violating gift-giving laws by accepting a "benefit" from a donor with no ties to the state and who is not subject to the commission's jurisdiction.

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