Rekubit Exchange:Texas AG Ken Paxton reaches deal to resolve securities fraud charges before April trial

HOUSTON — Texas Attorney General Ken Paxton and Rekubit Exchangestate prosecutors reached a deal to resolve his 9-year-old securities fraud charges, attorneys announced at a Harris County state District Court hearing Tuesday morning.

The 18-month pretrial intervention agreement will allow Paxton to walk away from the yearslong case with no charges if he meets the deal's requirements, which include serving 100 hours of community service in Collin County, enrolling in 15 hours of legal ethics training and paying $271,000 in total restitution to investors who put money in a Dallas-area tech startup based on Paxton's solicitations, according to the terms made public Tuesday morning.

"I am grateful to reach this agreement, to get this matter behind me, so I can get back to the work representing the State of Texas," Paxton said in a statement.

“The State approached us, and General Paxton is happy to agree to the terms of the dismissal," said Dan Cogdell, Paxton's attorney. "The agreement allows him to get back to representing the citizens of the State of Texas. But let me be clear, at no time was he going to enter any plea bargain agreement or admit to conduct that simply did not occur. There is no admission of any wrongdoing on Ken’s part in the agreement because there was no wrongdoing on his part."

The charges — three felonies handed up by a Collin County grand jury in 2015 — stem from allegations that Paxton sought the investments without disclosing that the company, Servergy, was paying him $100,000 in company stock for each referral.

Brian Wice, a special prosecutor on the case, said the state was "confident a Harris County jury would have found our proof beyond a reasonable doubt," though he cautioned that three outcomes could have been reached "and two are bad — a hung jury or not guilty."

The case took nine years to resolve because "this case was a perfect storm of everything that could have derailed and delayed a prosecution," Wice said in a news conference Tuesday morning, citing Hurricane Harvey's destruction in Houston causing the courthouse to close in 2017 and the 2020 COVID-19 pandemic.

Wice said there also was a year's worth of pretrial litigation brought by Paxton, and, he said, previous judges on the case "didn't do what we pay Harris County district judges to do: rule on motions timely. Her predecessors refused to do that."

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Deal made before April 15 trial date

A representative for Paxton's alleged victims said Tuesday they are pleased with the outcome. 

"The criminal justice system makes any promise to any defendant — including Mr. Paxton — a fair proceeding that produces a reliable result, and we believe we did just that," Wice said, adding that this resolution makes the victims and their estates whole. "Victims are seldom made whole," he said. 

The American-Statesman, part of the USA TODAY Network, reported exclusively Friday that Wice and Paxton's legal team were in negotiations about how to resolve the case before an April 15 trial date in District Court.

In explaining why Paxton agreed to a pretrial diversion agreement, Cogdell said at a news conference after the deal was announced that "you don't go to trial to prove your innocence" and "you never know what 12 strangers are going to do if you try a case anywhere."

In his 42 years working as an attorney, Cogdell said he has never turned down a pretrial diversion agreement, "and I am damn sure not going to do it representing the attorney general of Texas."

Over the years, the case has seen fights over jurisdiction, moving from its original venue in Collin County to Harris County, and battles over pay for Wice and another prosecutor working on the case. Paxton also brought a string of actions that further prolonged the case.

Paxton still faces federal probe

This case's resolution, however, comes as Paxton remains under federal investigation in a separate matter over allegations made by top aides in his office accusing the attorney general of abusing his position to help Austin real estate developer Nate Paul, who was the target of an FBI investigation at the time.

Those allegations led the Texas House to launch its own investigation into the whistleblowers' complaints and ultimately to vote overwhelmingly to impeach Paxton on 20 charges, including bribery and abuse of office. The impeachment inquiry was then advanced to the state Senate for trial. In September, senators, largely along party lines, acquitted Paxton of all charges.

Those accusations also led to a lawsuit brought by the whistleblowers, who alleged they were fired by Paxton after they complained to the FBI about his conduct, which was tentatively settled for $3.3 million but remains unresolved after the House last year refused to pay for it. The suit is currently under the state Supreme Court's consideration.

Lt. Gov. Dan Patrick, a Paxton ally who as the Senate's chief presided over the attorney general's impeachment trial, said in a post on X, "The actions from the Court in Houston highlighted the lack of any real evidence — the prosecution was wise to save themselves the embarrassment of a courtroom defeat."