HOUSTON — Did the special prosecutors pursuing Attorney General Ken Paxton fabricate a date in order to mislead a grand jury into indicting him?
Since The Texas Monitor reported on a secret legal document making that allegation, the prosecutors have persuaded District Judge Robert Johnson to allow them to tell their side of the story.
Late last week, the Harris County courts unsealed some of the previously secret records in the debate, from March of this year.
Paxton originally challenged the validity of his indictment in late 2015, but an appeals court rejected those arguments in June 2016 on procedural grounds, ruling that the proper time for such challenges would be on appeal after any eventual conviction, as Paxton hadn’t met the high standard of proving that the trial judge abused his discretion.
However, Paxton tried again this spring after Judge George Gallagher gave the defense access to a PowerPoint presentation by special prosecutor Brian Wice, which the defense team said they found misleading.
The question is on what date Paxton referred his client James Henry to Mowery Capital Management. Paxton is accused of soliciting business for Mowery without putting his name on a state registry, a charge he denies, arguing that he wasn’t required to register.
The date matters because the charge has a three-year statute of limitations. Paxton’s attorneys say that Paxton made the referral more than three years before he was indicted on July 7, 2015, and that the prosecutors knew the correct date and disregarded it.
The prosecutors told a grand jury that Paxton referred Henry and his wife to Mowery on July 18, 2012, which would fall just inside the statute of limitations. (On another occasion, in correspondence with a reporter, they said the referral was on July 12, 2012.)
Paxton says the referral was in June 2012, beyond the statute of limitations, and that the prosecutors have had the proof all along — namely, a “letter of authorization” dated June 26, 2012, in which Henry authorized Mowery and Paxton to “discuss any and all business related matters” concerning the Henrys’ “business and personal accounts at Mowery.”
If Henry had already established his accounts at Mowery, then clearly the referral came before that, defense attorneys say.
Actually, the key verb is “solicit,” not “refer” — that is, when did Paxton solicit business for Mowery? That’s according to an appeals court decision last year, although the prosecutors avoided the term in their statute-of-limitations argument.
So how did the prosecutors come up with the July 18, 2012, date? That is when, they say, Henry signed a paper Mowery gave him disclosing referral fees for Paxton. In other words, the prosecutors’ theory is that Henry signing that paper on July 18, 2012, was the culmination of Paxton’s criminal act.
They argue that the heart of the crime is acting as an investment advisor representative “for compensation,” and so, Paxton’s act wasn’t complete until Henry acknowledged the referral fees. In their newly unsealed brief, the prosecutors refer to the definition of “investment advisor representative” in state law, although the only part of the definition they actually quote is the phrase “for compensation.”
The actual definition is a “person or company who, for compensation, is employed, appointed, or authorized by an investment adviser to solicit clients for the investment adviser.”
As the prosecutors know, because they’ve cited it in other briefs, Paxton was authorized to solicit clients for Mowery, for compensation, in an agreement signed July 28, 2006.
The question is when he solicited them in this case. Although the prosecutors avoid the verb in their writing, as it focuses attention on when Paxton told his client about the investment manager, if their theory is going to hold, it will require a court to agree that the solicitation extended weeks past the discussion and the point Henry transferred his accounts to Mowery.
The prosecutors argue that the definition of the crime is “clear and unambiguous,” and the appeals court agreed last June that the meaning of “solicit,” at least, was perfectly clear.
Paxton’s attorneys had argued that “solicit” wasn’t clearly defined in state law, but the appeals court disagreed, finding that “the word ‘solicit’ is not vague, indefinite, or uncertain and its import is a matter understood by people who understand the meaning of the language.”
It means, the court wrote, “[t]he act or an instance of requesting or seeking to obtain something; a request or petition…. An attempt or effort to gain business.”
In the original 2015-2016 appeal over the statute of limitations, Paxton tried to offer evidence that the prosecutors had the dates wrong.
The prosecutors’ argument then was that Paxton was precluded by law from arguing about the dates, that he simply had to accept the dates they claimed until trial, when they could introduce evidence. It worked.
The prosecutors, however, have known since the start that they were up against the statute of limitations. In their very first conversations with Paxton’s first attorney, Joe Kendall, on June 28-29, 2015, they asked for Paxton to sign an agreement tolling the statute of limitations. Paxton declined through Kendall in a letter dated June 30.
A week later, Judge Chris Oldner, having empaneled the grand jury that indicted Paxton, walked to the clerk’s office in the Collin County courthouse, pulled the top of a sheet of paper out of an envelope, told the clerk it was an indictment, and had the clerk timestamp it to show that it had been filed.
Only Oldner didn’t file it, according to court records. He took it back to his office.
Jon Cassidy can be reached at [email protected].