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A good day in court for Paxton

He may well get those SEC charges dismissed.

Best mugshot ever

Best mugshot ever

Lawyers for the U.S. Securities and Exchange Commission received skeptical treatment Friday from a federal judge who is considering whether to dismiss the civil fraud case against Attorney General Ken Paxton.

From the outset, U.S. District Judge Amos L. Mazzant III noted that the SEC’s case against Paxton was unlike those he usually sees from the commission. Mazzant came across as less than persuaded by one of its central arguments. At one point, Mazzant suggested the SEC was trying to fit a “square peg into a round hole,” basing its case on precedents that do not back up their arguments.

“The court’s hard-pressed to find a case that fits into the allegation the SEC is making,” Mazzant said, “and that troubles the court.”

The judge did not rule immediately at the end of the 90-minute hearing inside a Sherman courtroom. He said he instead plans to issue a decision in 30 days.

[…]

Largely at issue Friday was whether Paxton committed securities fraud by simply leaving out information in his dealing with investors, not necessarily making misleading statements. Paxton lawyer Matthew Martens argued that the attorney general’s actions did not amount to fraud, leaning heavily on the argument that every court that has previously looked at the issue has rejected the SEC’s argument. Meanwhile, SEC lawyer Matthew Gulde asked Mazzant to look more broadly at Paxton’s actions as a “pattern of conduct” in which he acted as a “secret broker” and had at least two duties to tell investors he was being compensated.

“It doesn’t matter what we call it,” Gulde said. “It is a secret quid pro quo that needs to be disclosed.”

They sparred less extensively over another charge in the case involving Paxton’s failure to register as a securities broker. Paxton’s side argued that his action did not meet any definition of the term, while SEC lawyers countered that they were downplaying how active of a role Paxton had in recruiting investors. “Mr. Paxton is not someone who’s walking into this blindly,” Gulde said.

Mazzant often appeared more sympathetic to Paxton’s arguments, suggesting that Gulde was reaching to find case law to support the SEC’s case — at least with the current facts alleged. “I don’t know how we get there,” Mazzant said at one point.

See here and here for the background. The state charges against Paxton are higher stakes, because the SEC case is a civil one, for which only a fine could be levied. Getting the charges tossed, if that is what happens, would still be a pretty big win for Paxton, as at the very least it lends credibility to his whole “I’m being persecuted” schtick. He needs his supporters to keep the faith, and his underwriters to keep those checks coming. He’s already beaten the Bar Association grievances, so this would give him two in a row. The third one is way bigger than the other two, though. We should know where he stands in a month. The Chron has more.

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