| AUSTIN, Texas, March 2
AUSTIN, Texas, March 2 A federal judge in Texas
dismissed securities fraud charges on Thursday leveled against
state Attorney General Ken Paxton, saying he did not act
illegally in his dealing with a technology company U.S.
regulators have accused of defrauding investors.
Paxton is also facing state security fraud charges for his
relationship with the Texas company, Servergy Inc, and a
separate investment firm. The Tea Party Republican, who has been
trying for months to have all charges dismissed, has said he is
the victim of a political witch hunt.
The U.S. Securities and Exchange Commission has accused
Servergy, a computer hardware company that develops cloud-based
data storage servers, of selling private stock while misleading
investors about the energy efficiency of its sole product.
It also accused Paxton of working to raise investor funds
for the company without disclosing his commissions.
In dismissing the federal charges, U.S. District Judge Amos
Mazzant said Paxton "had no plausible legal duty to disclose his
compensation arrangement with investors."
Paxton, who was then a member of the state legislature,
recruited investors for Servergy between July 11 and 31, 2011.
He raised $840,000, or about one-third of all the investment
funds Servergy attracted that year, the judge said.
"The primary deficiency was, and remains, that Paxton had no
plausible legal duty to disclose his compensation arrangement
with investors," the judge said. Last year, he had thrown out
similar charges against Paxton and took up the case again when
the SEC amended its filing.
Paxton applauded the decision.
"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," he said in a statement.
Servergy agreed to a $200,000 penalty to settle the SEC
case. It neither admitted to nor denied the agency's charges.
The state felony fraud case against Paxton is set to start
on May 1.
Paxton, who has sued the administration of former Democratic
president Barack Obama more than a dozen times since he took
office as the state's top lawyer in 2015, faces up to 99 years
in prison if he is convicted on the most serious charge.
(Reporting by Jon Herskovitz; Editing by Lisa Von Ahn)