Thursday, August 6, 2015

The "Strange" legal theory behind Paxton case...


"A righteous man hates lying,
But a wicked man is loathsome and comes to shame."
Proverbs 13:5

Fantastic legal analysis from Watchdog:
Paxton isn’t being accused of telling a lie, which is a factual question. He’s being accused of the much more subjective charge of misleading investors by failing to state a material fact. Actually, the indictments just allege the failure to state a fact; they don’t explain how anyone was misled.

Mateja told Texas Lawyer he had expected Paxton would be accused of making a fraudulent misrepresentation, and that he was surprised by the actual indictment.

“They are saying that it was unlawful for him to fail to mention that he had not personally invested (in a tech company called Servergy) and he would be receiving compensation,” Mateja said.

If that by itself were found to be a crime, securities traders across the state could be facing criminal exposure every time they make a sale, unless they take the unusual step of telling clients that they hadn’t purchased the stock for their own portfolios.

Paxton did have stock in Servergy, though: 100,000 shares that he’s been reporting on his annual disclosure forms since 2011.

The prosecutors are apparently unclear about whether Paxton already held those shares when he solicited investors, or whether he got them later, as they accuse him of failing to disclose to them that he “would be compensated, and had, in fact, received compensation from SERVERGY, INC., in the form of 100,000 shares.”

So either he would be or he had been. What the newspapers miss is that this isn’t an explicit violation of any law. It’s the special prosecutors’ opinion that Paxton should have volunteered this information.

“The question is: Would these investors — would they have changed their minds based on knowing that information,” Mateja told Texas Lawyer. “This case is going to boil down to materiality.”

San Antonio attorney Cynthia Orr, who defends people accused of securities violations, told the trade publication she found the allegation “strange.”

“How would it be material to an investor that (Paxton) had not invested,” said Orr. “I would attack it. … How would it make someone invest, where they would not invest had they known?”

....

Paxton’s name shows up once in the middle of a 143-page court filing in an otherwise obscure case, leading savvy observers to recognize that an operator somewhere put that item out. That, and the involvement of [Byron] Cook, who’s closely allied with Speaker Joe Straus, a Paxton antagonist, is one of the factors suggesting forces at work behind the scenes.
Read the whole thing here.

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One more question: Assuming, for the sake of discussion, that Ken had actually ripped off Cook...why didn't Cook sue him two or three years ago?!?

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