A federal district judge in North Texas has dismissed with prejudice a securities fraud case brought against Texas Attorney General Ken Paxton by the Obama Administration, finding that the Securities and Exchange Commission could not articulate a “plausible claim against Paxton under federal securities laws.”

Paxton was exonerated in federal court despite the judge’s obligation to take all facts plead by the SEC as true for purposes of the dismissal. In a 27-page order, District Judge Amos Mazzant went through the SEC’s charges item-by-item and explained why each allegation did not constitute a violation of securities laws.

Paxton responded to the news, pledging to hold the SEC accountable for their misconduct in the case, which he called a “travesty.”

“I have maintained all along this whole saga is a political witch hunt,” said Paxton. “Today’s ruling to dismiss the charges with prejudice confirms that these charges were baseless when the SEC initially brought them and they were without merit when the SEC re-filed them.  Someone needs to hold the SEC accountable for this travesty.”

Mazzant had previously dismissed the SEC’s case against Paxton in October, but he allowed the Obama administration to re-file it. Despite the fact that their amended pleadings were dishonest – the amended claims were directly contradicted by the SEC’s own witnesses – and designed to survive a second motion to dismiss, they remained insufficient to support a plausible legal theory in which Paxton violated securities laws.

In the end, the SEC never could point to a single false statement made by Paxton that would support the charge that he committed fraud. No convoluted legal theory could get the SEC around the fact that Paxton is innocent, and there’s no evidence to the contrary.

Now all eyes turn to a rogue criminal prosecution in Collin County based on identical charges where a set of special prosecutors are required to prove all of their claims beyond a reasonable doubt.

“We are now focused on Ken Paxton’s full exoneration in the state matter, where the special prosecutor’s burden is even higher and the fraud allegations in the SEC case mirror those in the state case,” said Bill Mateja, Paxton’s lead criminal case counsel.

Special prosecutors Kent Schaffer and Brian Wice have become progressively more and more unhinged in their handling of criminal charges against Paxton in Collin County based on the same allegations that were dismissed in federal court. For example, the prosecutors have used recent filings to lash out at their critics in the media and to paint bizarre conspiracy theories.

Schaffer and Wice are two private criminal attorneys from Houston who were appointed to the case by Collin County District Judge Scott Becker. Wice is well known in Houston for appearing as a commentator on criminal cases for local news outlets. Schaffer has been in the news in recent months after he was labeled an unindicted co-conspirator of the Bandidos motorcycle gang due to his work as an attorney on that organization’s behalf.

On a handshake deal, Becker agreed to pay the pair $300 per hour to investigate and prosecute Paxton, an amount that appears to violate state law and local rules. At that rate, Schaffer and Wice and one other attorney have billed Collin County over $600,000 on the Paxton matter. However, the Dallas Court of Appeals has recently issued a stay shutting down payments to the prosecutors and the court will review whether Becker’s deal with them violated state law.

Under Texas criminal procedure, Schaffer and Wice benefit because they are not required to allege the facts they claim will support their indictments against Paxton. Because of this, pre-trial dismissals based on factual inadequacy are nearly impossible to obtain in a Texas criminal case.

This tilted playing field has allowed the Schaffer and Wice to run up their bill in the Paxton case while the SEC dismissal proves it will be impossible for them to obtain a criminal conviction against Paxton that will survive an appeal.

Put simply, Paxton just won his case under a standard where a judge was required to assume every allegation his accusers made was true. The SEC didn’t have to prove anything. They just had to allege a plausible theory.

There simply is no possible way that Schaffer and Wice can – absent corruption of the criminal justice process – obtain a conviction against Paxton when they are required to do much more than simply allege a “plausible” theory. As criminal prosecutors, they must prove their allegations beyond a reasonable doubt. That cannot be done in Paxton’s case, and their continued efforts to run up their bill at taxpayers’ expense are a farce and an insult to our justice system.

It is time the Texas judicial system took control of the rogue criminal prosecution in Collin County. Texas cannot continue to allow the criminal justice system to be abused as a political weapon or as a profit scheme for private lawyers.

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.


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