IssuesProsecutors in the Ken Paxton Case Appear Divided

Did the law allow for a few thousand dollars, or an open-ended handshake deal that’s produced $805,000 in invoices, and counting?

On Monday, the court finally decided not to do anything, reaffirming its decision six months ago not to do anything. The lower Court of Appeals had it right: the law limited the prosecutors to a fixed rate – in their case, just a few thousand dollars.

So, after nearly two years of nothing happening, the case against Paxton is set to get going once again.

Paxton was indicted in 2015 on three felony counts of securities fraud. But a federal case against him over the same investment pitch was dismissed in 2017 as legally baseless. The third count, regarding a supposed registration violation, is in doubt for two reasons in particular.

One, a 1996 federal “blue sky” law exempts investment advisor representatives such as Paxton from state securities regulations if they “[do] not on a regular basis solicit, meet with, or otherwise communicate with clients of the investment advisor.” Paxton often went years between investment referrals.

Two, the prosecutors have been accused of knowingly “fabricating” a date of the alleged registration offense in order to charge Paxton before the statute of limitations expired. The document used to establish the date had already been recognized by the prosecutors as a forgery by an unrelated party before the indictment was obtained.

The doubts over the legitimacy of Paxton’s prosecution prompted the Collin County Commissioners Court to challenge the court order to pay for the prosecution – some $805,000 invoices just through the end of 2016, including the bills for a fourth attorney who represented the other three in related litigation.

That led to a Dallas Court of Appeals decision voiding a $205,000 invoice, which now stands after the CCA’s final decision. Earlier payments of $370,000 to the three prosecutors and a fourth attorney representing them have not yet been challenged, although the Collin County Commissioners Court retains the discretion to do so.

So what’s next?

The first step will be some sort of status conference set by Harris County Judge Robert Johnson, perhaps including status reports by the parties, but the real order of business will be a show of hands all around. 

First up, the special prosecutors: Kent Schaffer, Brian Wice, and Nicole DeBorde. The short version reported in the media is that the prosecutors have threatened to quit if they were denied their $205,000.

That glosses over an apparent split in their camp. Schaffer and DeBorde appear to be done with the case, but Wice may try to press on by himself. Wice has carried the heavy lifting of drafting all the legal arguments; Schaffer’s role was always supposed to be courtroom closer.

Wice could not be reached for comment; neither could lead defense counsel Bill Mateja. Both are under a gag order.

The split between prosecutors shows up in their final legal filings. Throughout the case, all three prosecutors signed their briefs. But after the CCA ruled against the prosecutors’ petition to have their $205,000 payday restored, Wice pressed on alone, submitting a petition in his own name, signed only by himself, asking the court to reconsider the matter it had just decided, based on its failure to agree with his earlier arguments, much like Demi Moore “strenuously” restating her objection to a ruling in “A Few Good Men.”

Known for sticking movie references into his legal briefs, Wice has managed to serve up the sort of quotable snippets that get picked up by media outlets more interested in colorful generalities than legal specifics. He has an opportunity now: instead of making strained arguments that the failure to pay him was like the U.S. interning Japanese-Americans during WWII, he can play the part of the pro bono lawyer taking the case for justice alone, and trust the media to frame it that way.

For example, with just this latest development, the leftist Texas Observer published an article using Wice’s exact framing – that the latest decision showed the corruption of “the system in favor of the rich, powerful and well-connected at the expense of the poor.”

The Texas Tribune also missed the central issue – whether or not special prosecutors have to be paid standardized fees – and reported that “judges are permitted to approve payments outside those strictures in unusual circumstances,” but that an appeals court simply “voided” the prosecutors’ fees for reasons unexplained. 

The Dallas Court of Appeals held that the law required a preset “framework” for attorneys’ fees, and that any “unusual circumstances” had to be addressed within that framework; the phrase wasn’t a loophole that allowed a judge to award open-ended contracts to lawyers.

Susan Fletcher, one of the Collin County Commissioners who pushed for a lawsuit to challenge the prosecutors’ fees, said that the law that the appeals court upheld is crucial to the county’s efforts to control its budget.

“What do you think would happen if these outrageous, inflated fees were allowed in this case and the court had ruled differently,” Fletcher asked. “I can tell you. Every indigent convicted criminal from Collin County would be asking for additional legal representation. They would have had a legal angle to ask for ‘equal’ to the amount that was spent prosecuting the Attorney General. You would see requests for multiple attorneys, and unparalleled expense. Had the court ruled differently, I cannot even fathom the potential impact on our future budgets regarding indigent defense payments, and I would likely be proposing a county-level economic stabilization fund.”

The issue raised by the media – that the ruling might somehow make it hard to find future special prosecutors to appoint – has been mooted by a law passed in the most recent Legislative session, which puts an end to prosecution for profit. Under the bill sponsored by Sen. Joan Huffman (R-Houston), in the case of recusal by a district attorney, courts are to appoint a district attorney from another jurisdiction, a city attorney, or a prosecutor from the Attorney General’s office, for no extra pay.

The Houston Chronicle got the ruling even more incorrect, putting in a headline that the case against Paxton was now “jeopardized,” and the attorneys “will be paid the same amount they would if they were representing a felony DWI defendant.”

Wice, Schaffer, and DeBorde have already been paid $242,025, rather more than anyone gets for defending a DWI case. More importantly, the case is in no way “jeopardized” from outside.

Wice may press on. If he steps down, then Harris County District Attorney Kim Ogg, a Democrat, would be in position to make a determination about the case. The problem for any district attorney deciding to press on with the case is that securities fraud is well outside their wheelhouse. By long convention, this area of law is handled by the Securities and Exchange Commission and by state securities regulators.

Those top state securities regulators are already on the record in pointing out how unusual the decision to prosecute Paxton is.

It’s not a sure thing that Wice or Ogg will make the key decision.

First, Judge Robert Johnson, a Harris County Democrat, has to decide that he wants to go forward with the case. He has the discretion to dismiss, or to transfer it elsewhere if he chooses. 

If he were to decide to send the case elsewhere, the district attorney in that other jurisdiction would likely make the call about pressing on.

The only reason the case is in Harris County is that former presiding judge George Gallagher, since disqualified, decided to change venue from Collin County to a large urban district at the request of prosecutors seeking a more favorable venue. The three options he offered the lawyers: Democrat-heavy Fort Worth, majority-Democrat Dallas, and majority-Democrat Harris County.

Paxton’s internal polling shows that he provokes a strong negative response among many Democrats.

Gallagher gave two official reasons for moving the trial to Harris County: “Harris County was selected because the lead counsel for the state and the defense are located there,” and “Harris County also has the facilities to accommodate the trial.”

That second rationale was wiped out by Hurricane Harvey flooding the county’s courthouses, which continues to stress daily operations there.

The first reason remains half-true. The lead counsel for the defense, Bill Mateja, now works for a Dallas firm. But Wice is still in Houston.