Texas Attorney General Ken Paxton’s attorneys have gone to court, seeking to force the Securities and Exchange Commission to produce notes of their interviews with the investors whose allegations form the basis of the civil case against him.
Paxton’s attorneys filed the motion to compel the SEC to turn over the documents Wednesday. SEC officials have refused to turn over the documents calling them “work product.”
His attorneys contend an SEC attorney told him that turning over the interview notes would show “the direction that we steered (the witness) with our questions would give away our strategy,” the motion states.
It’s the latest twist and turn in the Paxton case.
In early October, a federal judge dismissed the civil charges against Paxton, finding that the SEC did not have sufficient evidence to prove Paxton had a “fiduciary duty” to disclose that he was receiving commission from convincing other investors to invest in the McKinney-based tech startup Severgy. That group involved State Rep. Byron Cook, a former friend of Paxton’s.
Two weeks later, the commission filed the amended civil charges.
Paxton faces similar criminal charges at the state level. Cook and his friend, Joel Hochberg, are the named victims in the first-degree felony indictments in Collin County.
The SEC’s amended filing claims that Paxton alleged that members of the group had a standing policy that “no member makes money or otherwise benefits off the investment of another member.” It states that “Investor 1 ‘informed and expressly’ told Mr. Paxton about supposed policies of the group,” the motion states. (Paxton’s attorneys contend that Investor 1 is a reference to Cook.)
The SEC’s prior filing did not mention the existence of any such policy.
In Paxton’s motion, lawyers for Paxton state that they received an email from Cook and Hochberg’s attorney stating that there “was no formal group,” but rather an “ad hoc arrangement for time to time, good friends might invest in the same transaction.”
“This is a dramatically different story than the tale the SEC has spun about a decades-old investment group with established policies and practices,” the motion states.
The motion says the attorney for Cook and Hochberg also stated that they did not consider Paxton to be their broker.
Paxton’s attorneys want notes of the SEC’s meeting with Cook and Hochberg to determine “where and how this divergence in stories occurred.”
The motion also notes that Paxton’s sworn statement was taken back in December 2014, yet the SEC did not take sworn testimony from potential investors in Servergy.
The SEC interviewed Cook and Hochberg before filing its original case in April, but did not take statements under oath.
Paxton’s attorneys say the SEC re-interviewed Investor 1 (thought to be Cook) before filing the amended complaint. They contend that the interview notes should be turned over because the allegations in the amended complaint rest “almost entirely on those statements,” the motion states.
They also contend that the interview notes would show if there were any “inconsistencies” between the statements.