© 2017 The Texas Lawbook.
By Mark Curriden
(March 2) – U.S. District Judge Amos Mazzant today dismissed with prejudice the U.S. Securities and Exchange Commission’s fraud charges against Texas Attorney General Ken Paxton.
The judge’s decision effectively ends the federal case against Paxton unless the SEC decides to appeal to the U.S. Court of Appeals for the Fifth Circuit in the next month.
In a 37-page opinion, Judge Mazzant wrote that the SEC “has not alleged facts sufficient to support a plausible claim” under federal law. The judge previously dismissed the SEC’s case last October, but allowed the federal government to amend its complaint, which it did.
But Judge Mazzant said the fixes the SEC made to its charges were not sufficient.
“This case has not changed since the Court conditionally dismissed the Commission’s Original Complaint,” the judge wrote. “The primary deficiency was, and remains, that Paxton had no plausible legal duty to disclose his compensation arrangement with investors.
“The question before the Court is not whether Paxton should have disclosed his compensation arrangement but whether Paxton had a legal duty under federal securities law to disclose,” the Dallas judge wrote. “As alleged, Paxton’s conduct simply does not give rise to liability under the federal securities laws as they exist today. And it is not the province of the Court to stretch federal securities laws beyond their scope to prescribe liability based on moral considerations or policy concerns.”
Judge Mazzant said that the sole legal issue was whether the “facts as pleaded give rise to a plausible claim under federal securities laws.” The judge said that in his opinion, they did not.
Polsinelli shareholder Bill Mateja, who represents Paxton in the SEC and state criminal case, applauded the opinion.
“We are now focused on Ken Paxton’s full exoneration in the state matter, where the special prosecutor’s burden is even higher and the fraud allegations in the SEC case mirror those in the state case,” Mateja said in a written statement.
Attorney General Paxton issued the following statement: “I have maintained all along this whole saga is a political witch hunt. Today’s ruling to dismiss the charges with prejudice confirms that these charges were baseless when the SEC initially brought them and they were without merit when the SEC re-filed them. Someone needs to hold the SEC accountable for this travesty.”
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