DALLAS — The indictment of Attorney General Ken Paxton should not cause any delays in the state's bond approval process, according to experts.
All bond deals in the state must be approved by the attorney general, who certifies that issues are free of litigation and are permissible under state law.
"Once the attorney general issues that opinion, it's irrefutable," said one Texas bond counsel who asked that his name not be used. "The fact that the attorney general has to deal with these legal troubles, we'll all read about that in the paper and we're all chatting about it, but it shouldn't have any effect on issuance."
Rulings on hundreds of bond issues come from the Attorney General's Public Finance Division, which is expected to continue functioning normally as Paxton fights the charges of securities fraud and failing to register as a financial advisor.
Bond counsel have detailed discussions with the AG's office and rely on rulings about numerous details involving public finance, lawyers explained.
With $41 billion of issuance in 2014, Texas ranked second in bond volume behind California.
Paxton, who took office in January after winning election Nov. 4, surrendered to the Collin County Sheriff's Office on Monday on felony charges and was released on personal bond.
According to the indictments unsealed Monday, Paxton is accused of securities fraud and failing to register with the State Securities Board while referring business to a friend's financial advisory firm.
"Attorney General Ken Paxton will plead not guilty to these accusations, and he will demand a trial by jury," Paxton's attorney Joe Kendall said in a statement. "He is looking forward to the opportunity to tell his side of the story in the courtroom."
The two first-degree charges allege that while Paxton was a member of the Texas House in 2011, he failed to tell investors that he had been paid with 100,000 shares of stock for steering clients to McKinney-based Servergy Inc., in 2011. The clients included
state Rep. Byron Cook, R-Corsicana, and Florida businessman Joel Hochberg, according to the indictment.
Paxton referred investors to his friend Frederick "Fritz" Mowery's Mowery Capital in McKinney and has admitted to doing so without registering with either the State Securities Board or the U.S. Securities and Exchange Commission as a financial advisor. However, his spokesman has claimed that the violations were civil and not criminal. Paxton was elected Nov. 4, even after the violations were heavily publicized in the Republican primary.
A team of administrative law judges issued a recommendation to the State Securities Board July 31 that Mowery be allowed to retain his state license but pay a $60,000 fine. The judges also found that Mowery's attempt to backdate documents and failing to disclose his own bankruptcy were improper.
Special prosecutors Kent A. Schaffer and Brian Wice led a grand jury investigation supported by the Texas Rangers, a unit of the Texas Department of Public Safety. The indictment was handed up July 28 but not unsealed until Monday, Aug. 3. Schaeffer and Wice are Houston defense attorneys assigned to serve in place of Collin County District Attorney Greg Willis, a longtime friend of Paxton's.
An Austin public interest group called Texans for Public Justice, sought a criminal investigation of Paxton's actions. The group earlier filed a complaint that led to a felony indictment of former Gov. Rick Perry, one of 17 Republicans running for president so far.
After learning of the Paxton indictment on Aug. 1, TPJ issued a statement that "the only acceptable response to today's indictment of Attorney General Ken Paxton is his resignation."
The Republican Party of Texas called the indictment a "sloppy process" and said Paxton should not be judged by public opinion.
"Since being overwhelmingly elected by the voters of Texas, General Paxton has helped lock up child predators, investigated the odious acts of Planned Parenthood, relentlessly pushed back against an overreaching federal government, and we expect him to fight these allegations with that same zeal," party spokesman Aaron Whitehead said.
The Texas Democratic Party also called for Paxton's resignation.
"He needs to spare Texas the embarrassment of a drawn-out legal fight in the public eye, take responsibility and accept the consequences," party chairman Gilberto Hinojosa said. "It is time to restore the public trust. It is time for a Republican to finally act responsibly."
In testimony before the State Securities Board, Mowery said that Paxton's campaign for the attorney general's office against Republican Dan Branch proved damaging to him and his business.
"I have been under the microscope of the media because of my relationship with Ken Paxton," Mowery said. "Every night almost I was seeing my name flashed on Dan Branch's commercial. I was getting — my phone was blowing up from phone — from media people, calling me, trying to get me to make statements. They were ambushing me in my parking lot."
During that time, Mowery said he was having health problems, his son was convicted and sentenced to prison for "intoxicating manslaughter," he was trying to get his widowed father into assisted living and he was taking care of a handicapped brother.
"I had lots of pressures," Mowery said in the 2014 hearing. "It's not been a good year."
Paxton succeeded current Gov. Greg Abbott as attorney general.
The last Texas attorney general indicted while in office was Democrat Jim Mattox, who was prosecuted by Earle on charges of commercial bribery and later acquitted. Mattox won election to a second term.
Former attorney general Dan Morales, a Democrat, was indicted and pleaded guilty to charges of falsifying documents in the state's tobacco settlement in October 2003. While the charges stemmed from actions Morales took as attorney general, he was not in office at the time he was indicted.
