AUSTIN, Texas (AP) — Federal securities regulators filed civil fraud charges Monday against Texas Attorney General Ken Paxton over recruiting investors to a high-tech startup before becoming the state's top prosecutor.
The U.S. Securities and Exchange Commission filed the lawsuit against Paxton and former executives of Severgy Inc. Paxton is already under felony criminal indictment in Texas over allegations that he defrauded wealthy investors in the company in 2011.
Paxton attorney Bill Mateja says he hasn't reviewed the civil federal lawsuit yet but that his client "vehemently denies" any wrongdoing.
Paxton, a Republican, has pleaded not guilty to the criminal charges and has repeatedly said he won't resign. If convicted of the criminal charges, he could face five to 99 years in prison. A Dallas state appeals court is scheduled to take up the criminal indictments next month.
The lawsuit filed in federal court in North Texas accuses Paxton of helping raise $840,000 for Servergy and being paid in the form of 100,000 shares of Severgy common stock. Regulators accuse Paxton of not telling investors of his arrangement with the company.
"At no time did Paxton disclose his compensation agreement with Servergy to prospective investors, despite an obligation to do so," the lawsuit reads.
Paxton surged to office with strong tea party support and took office in January 2015. A year earlier, Texas Sen. Ted Cruz, a GOP presidential candidate, called him a "tireless conservative warrior" as Paxton trounced a moderate Republican challenger on the way to becoming Texas' top law enforcement officer.