The special prosecutors in the case against Attorney General Ken Paxton “fabricated” a date in order to secure an indictment, according to a sealed brief just made public for the first time.
That’s one of several reasons that Paxton’s defense attorneys gave for throwing out an indictment on a securities registration charge. Those arguments were rejected without comment in a March 29 order by Judge George Gallagher, who has since been removed from the case.
The sealed brief was posted to DirectActionTX.com by conservative activist Aaron Harris earlier today.
According to the filing, the prosecutors knew that the three-year statute of limitations had expired when they obtained their first indictment of Paxton on July 7, 2015.
The defense also argued that Paxton didn’t fit the definition of an “investment advisor representative” under controlling federal law and that he wasn’t required to register with the state before referring clients to an investment manager, as that manager was already registered with the Securities and Exchange Commission.
The easiest to understand is the argument about the dates. The defense argues that prosecutors “misled the grand jury concerning the date” the referral took place, ignoring clear evidence that the statute of limitations had already expired.
On July 7, 2015, while his partner Kent Schaffer was on vacation in North Africa, special prosecutor Brian Wice gave a PowerPoint presentation to a Collin County grand jury. In it, he “claims that Paxton referred the Henrys (his clients) to Mowery Capital Management on ‘July 18, 2012,’” a date the defense claims was “fabricated.”
Their evidence for that claim? “A letter of authorization dated June 26, 2012, which was in the prosecutors’ possession at the time of the grand jury, showed that the Henrys authorized Paxton and Frederick Mowery, the owner of MCM, to ‘discuss any and all business related matters’ concerning the Henrys ‘business and personal accounts at Mowery.’”
If his clients had already established their accounts with Mowery by June 26, then a later referral would, of course, be impossible.
“I am ethically precluded from responding to your request for comment,” said Brian Wice in response to The Texas Monitor. “Because neither Paxton’s motion to dismiss nor the State’s response has ever been ordered unsealed, they are unavailable to the public.”
State law mandates that grand jury proceedings remain confidential, Wice explained.
Mark Pulliam, a retired attorney living in Austin and a conservative, said that “some of the arguments seem quite strong — statute of limitations, federal preemption, and no need to file because of the federal registration. The prosecutors were plainly overreaching. I’m just surprised the arguments weren’t made earlier.”
The federal preemption Pulliam was referring to is a 1996 “blue sky” law that exempted investment advisor representatives from the thicket of state securities regulations if they “[do] not on a regular basis solicit, meet with, or otherwise communicate with clients of the investment advisor,” among other aspects that would apparently exclude Paxton from registration requirements.
Pulliam also noted that “this only affects the ‘failure to register’ count, which is the weakest and least serious of the counts.”
Paxton was also indicted later in July 2015 on two other felony counts related to an investment he recommended to state Rep. Byron Cook.
The sealed brief raises yet more questions, Harris says, about the conduct of former judge Chris Oldner, who recused himself hours after securing the second and third indictments.
“The prosecutors fabricated a date — and Judge Oldner appears to have allowed them to do so — and the grand jurors were simply given inaccurate information, information that if correct would not have allowed for an indictment under the law,” Harris said.
The brief also cites handwritten notes taken by grand jurors on comments Oldner made inside the grand jury room.
“From these notations, one can infer that before special prosecutors presented evidence or witnesses regarding Paxton on the morning of July 6, 2017, Judge Oldner spoke directly to the 416th Grand Jury, priming them for an ‘unusual case’ against Paxton that required ‘DA recusal’ and ‘special prosecutors,’” the defense attorneys write. “By calling the grand jurors’ attention to the ‘unique’ nature of the case and going against protocol and statute to instruct grand jurors regarding the Paxton hearings, Judge Oldner was likely to have more than ‘just a slight effect’ on the charging decision.”
The legality of Oldner’s visit to the grand jury room hasn’t yet been resolved, and would likely be a matter for appeal if Paxton were to be convicted.
Both sides are waiting to hear what the Court of Criminal Appeals decides regarding the special prosecutors’ pay arrangements.
There is a scheduling hearing in the criminal case on the Harris County docket for Dec. 13.