New motions filed in a federal lawsuit brought by the Securities and Exchange Commission against Texas Attorney General Ken Paxton severely undermine the agency’s case and further discredit a related criminal prosecution in Collin County.

On Wednesday, Paxton’s attorneys filed a motion to compel the SEC to turn over notes related to interviews the federal agency conducted with State Rep. Byron Cook (R–Corsicana) and his business partner, Joel Hochberg.

The motions make a number of shocking allegations, including:

  • Attorneys for the SEC confessed in private conversations with Paxton’s lawyers that they “steered” Cook and Hochberg toward making statements beneficial to the Obama administration’s case against Paxton.
  • Despite a two-and-a-half-year investigation, the SEC has not interviewed anyone other than Paxton, Cook, and Hochberg.
  • The SEC did not subpoena Cook or Hochberg, did not record their interviews, and did not put them under oath.
  • Cook has changed his story regarding the nature of the “investment club” relating to his complaints against Paxton.
  • Cook and Hochberg have admitted that they did not consider Paxton to be their investment broker.

Federal Judge Amos Mazzant dismissed the SEC’s case against Paxton in October, but the agency has since filed an amended pleading. In its new petition, the agency has alleged that Paxton, Cook, and Hochberg participated in a formal investment club with “established purposes, policies, and practices” that Paxton allegedly violated.

But an email from Byron Cook’s lawyer attached to Paxton’s motion says otherwise. In the email, Cook’s lawyer, Terry Jacobson of Corsicana, wrote:

“There was no formal group that existed. Instead, there was an ad hoc arrangement where, from time to time, good friends might invest in the same transaction—or were at least offered the opportunity to invest in the same transaction. The persons who invested differed from transaction to transaction, and the length of time they had invested all differed from person to person.”

Because the SEC’s case against Paxton is being conducted in the civil court system, the agency is required to allege the facts they intend to prove. This has allowed the court to measure the legal sufficiency of the government’s allegations and to order an early dismissal of the case. Indeed, in one hearing, Mazzant told SEC lawyers they were trying to put “a very large square peg into a round hole.”

Unfortunately for Paxton, the special prosecutors in the criminal prosecution against him were allowed to secure an indictment that merely tracks the elements of the crimes he is alleged to have violated. With no requirement that they make specific factual allegations, it is impossible to measure the legal sufficiency of the case the prosecutors are expected to make.

This means that Paxton must take his case to trial. Only if he is not victorious in obtaining an acquittal on a factual basis will he then be able to challenge the legal sufficiency of the case against him on post-conviction appeal.

The inability of the SEC to even plead a civil case that, viewed in the light most favorable to them, amounts to a violation of the law shows once more that there is no way possible for the special prosecutors who are pursuing Paxton to obtain a valid conviction.

Taxpayers in Collin County should be demanding that their leaders end the corrupt travesty of the criminal justice system that is the Paxton criminal prosecution.

Tony McDonald

Tony McDonald serves as General Counsel to Texas Scorecard. A licensed and practicing attorney, Tony specializes in the areas of civil litigation, legislative lawyering, and non-profit regulatory compliance. Tony resides in Austin with his wife and daughter and attends St. Paul Lutheran Church.