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Fritz Mowery

Paxton’s pal’s firm fined again

A bigger penalty this time, though he’s still in business.

Best mugshot ever

Best mugshot ever

Mowery Capital Management, a McKinney-based investment firm with ties to indicted Attorney General Ken Paxton, has been fined $90,000 for violating state securities laws by providing false documents to Texas investigators and misleading clients about a past bankruptcy, state filings show.

The cease-and-desist order by Securities Commissioner John Morgan was issued late Friday, officials said.

The order requires Mowery Capital and its head, Frederick “Fritz” Mowery, to “immediately cease and desist from engaging in any fraudulent conduct enumerated herein in connection with rendering services as an investment adviser,” according to the 24-page order that cited six specific violations of state securities law.

The charges paralleled ones recommended by two administrative law judges last August against the firm and Mowery, a longtime Paxton friend and business associate. But the order did not levy harsher punishments that could have included revocation of their state licenses or higher fines ordered for similar violations in other cases.

[…]

According to the order, Mowery violated securities laws by making misrepresentations in required disclosure documents and failing to properly disclose business ties to clients, among other actions.

Securities Board investigators had earlier alleged that Mowery backdated documents to try to show that his firm made required disclosures of a finder’s fee arrangement, apparently involving Paxton.

One allegation was that Mowery provided false testimony by denying to board employees that he had lifted and put on his firm’s website for eight years entire passages written by economist and television commentator Larry Kudlow, without crediting Kudlow.

Other allegations: That Mowery and his firm falsely represented in a client brochure that they had used a “discount broker,” when they were using a more costly firm, and that Mowery had not been in bankruptcy proceedings, even though he had declared bankruptcy in 2005.

See here and here for the background on Mowery, and here and here for his last trip to see the State Securities Board. The cost for that previous trip was $60,000 in fines. It’s not clear to me why there was a separate set of charges, and there’s no mention of the appeal by the Board of the other judges’ decision to leave Mowery’s license intact. What is clear is that the closer you are to Ken Paxton, the more likely you are to be in trouble of some sort. Trail Blazers has more.

Securities Board appeals Paxton’s pal’s sanction

“A pattern of deceit” indeed.

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Attorney General Ken Paxton’s role in promoting Frederick “Fritz” Mowery’s investment firm helps prove a pattern of deceiving clients and covering up financial troubles, the Texas State Securities Board said Friday.

Last month, two judges assigned to help the board decide whether to take away Mowery’s ability to advise Texans on investment opportunities said while Mowery did deceive clients and securities board staff, his state registration should not be revoked.

In a 62-page response to the judges’ recommendation filed Friday, board staff disagreed, saying Mowery repeatedly “acted with intent to deceive clients and the public” by handing over false documents to state investigators and misleading his clients by lying about a past bankruptcy, among other things.

Paxton’s role in Mowery’s firm helped prove this pattern of deceit, the filing added.

[…]

This pattern caused the board to question whether any of Mowery’s alleged oversights were truly unintentional, the filing adds. Mowery had told staff, in his attempts to retain his registration, that he did not realize he had failed to disclose an earlier bankruptcy to potential clients until he was being investigated by the agency.

“These facts fit a pattern common to Respondents and their disclosure practices. As soon as there is ‘heat’ around an issue, suddenly the necessary disclosure is made,” the board’s filing states.

“Given this pattern, the (judges) should not assume that the misrepresentation about the bankruptcy was an innocent oversight. The timing and Mowery’s pattern of conduct would suggest otherwise.”

See here, here, and here for the background. As I said before, I think Mowery’s punishment needs to include being put out of business, so I agree with the Securities Board. Everyone who voted for Ken Paxton needs to read those quoted bits. You want a Republican Attorney General, fine, that’s your choice. Do you really want someone who is deliberately and habitually this dishonest in his business dealings, especially with clients who are friends and colleagues? Do you really want to go to the mats for someone who is being propped up by wealthy interests who care more about their own access to power than anything else? You tell me. Mowery can respond to this response, and then the judges may alter their recommendations or not as they see fit. I’ll keep an eye on it.

Paxton’s pal’s problems

AG Ken Paxton’s partner in sleazy business Fritz Mowery was also in court on Monday.

Best mugshot ever

Mowery Capital Management, a McKinney-based investment firm with ties to recently indicted Attorney General Ken Paxton, presented false documents to state investigators and misled its clients by lying about a past bankruptcy, two administrative law judges said [last] Friday.

Judges Henry Card and Steven Rivas filed the proposed order Friday, finding that Mowery Capital and its head, long-time Paxton friend and business associate Frederick “Fritz” Mowery, violated state securities laws by sending clients a brochure that said he had not filed for bankruptcy – when in fact he had – and for presenting altered documents to staff with the Texas State Securities Board.

[…]

While the securities board commissioner has the authority to put Mowery and his firm out of business for these violations, Card and Rivas recommend that he not.

The state board will likely oppose the recommendation, however, telling the Chronicle on Monday it can take issue with Card and Rivas’ order when it “misstates evidence or incorrectly applies the law.”

“Although the administrative law judges found that Mowery and Mowery Capital Management engaged in fraudulent conduct, which constitutes the basis for the revocation of their registrations, the staff of the Texas State Securities Board is likely to file exceptions to numerous findings by the (administrative law judges),” said Texas State Securities Board Spokesman Bob Elder, in a statement to the Chronicle.

[…]

The state board will now have 15 days to file its exceptions with Card and Rivas. The judges will then consider the response and can accept some or all of the changes. If the parties cannot come to an agreement, the case could ultimately end up in state district court.

See here and here for the background. I personally think that being put out of business, then being hit with a blizzard of lawsuits, would be an appropriate remedy here. We’ll see what happens next. In the meantime, remember that scammers like Mowery, and by extension Paxton, tend to cheat friends and like-minded individuals. You have to gain someone’s trust in order to get them to give you their money on something that may sound too good to be true otherwise, and it’s easier to gain someone’s trust if that person thinks you’re cut from a similar bolt of cloth. If there’s a real weakness to the political support Ken Paxton still has, it will come from the voices of the fellow conservative Republicans who lost money thanks to him and Fritz Mowery. Keep an eye on that. Trail Blazers has more.

Paxton’s partner in alleged crime

Meet Fritz Mowery, the man who helped get AG Ken Paxton into trouble.

Ken Paxton

Fritz Mowery was on a mission.

Last April, he tried to convince investment clients to sign backdated forms saying they knew Ken Paxton had received money for referring clients.

In a hearing in March, Mowery said he did it, “because it became an issue with Ken Paxton.”

Paxton, who was sworn in as Texas Attorney General earlier this year, acknowledged in May 2014 that he solicited clients for Mowery without being registered with the state securities board to do that. He described it as an administrative error and paid a fine.

“Mr. Paxton’s deal just seems to be, ‘If I say I’m sorry, everything ought to be OK and it ought to be forgotten,'” said John Sloan, who represented a couple that sued Paxton and Mowery after losing hundreds of thousands of dollars in failed real estate deals. “The problem is the law [passed when] he was in the legislature [that] makes the conduct that he was engaging in a felony.”

[…]

A five-day administrative hearing this past March revealed details about the dealings between the two men. Regulators are seeking to revoke Mowery’s securities license and they allege that he engaged in pattern of misconduct that included misrepresentations, acting in his own self-interest over his clients’, and failing to disclose crucial information to clients.

Testimony showed the two men had been working together as far back 2004, the same year that Mowery founded Mowery Capital Associates.

Paxton was paid 30 percent of management fees for referrals that he made to Mowery.

[…]

But the testimony shows the lengths to which Mowery was going to get clients to sign the backdated disclosures last spring.

In one case, a disclosure was dated as having been signed in 2005. In reality, it wasn’t signed until 2014.

Read the whole thing, it’s quite illuminating. Mowery’s defenders and Paxton’s campaign flack insist that this is all just a big misunderstanding, an innocent mistake that anyone can make, and so on. I think there’s only so many times you can ask people who had no idea that Ken Paxton was getting a kickback when he steered them to Fritz Mowery to sign a backdated form saying that they had been informed up front about the Paxton/Mowery relationship before one is forced to conclude that the behavior was habitual and not accidental. That will presumably be one of the things that the grand jury convening in August will consider, along with whatever evidence of other alleged wrongdoing that the special prosecutors say they have found. As I’ve said, I can’t wait to see how that goes.

In the meantime, you may be wondering about Paxton’s legal bills.

Attorney General Ken Paxton, dogged by a cloud of legal uncertainty since taking office in January, is not using taxpayer dollars to pay his lawyers, according to aides, who left it less clear whether he plans to tap his campaign account.

The question of how he has been footing his legal bills flared up Thursday with the disclosure of campaign finances that showed he spent almost $20,000 on legal services during the first half of the year. A Paxton spokesman indicated the expenses did not have to do with the ongoing fallout from his self-admitted violation of state securities law last year.

A special prosecutor overseeing the latest chapter in the saga has said he plans to ask a Collin County grand jury to indict Paxton on a charge of first-degree felony securities fraud. The grand jury is expected to meet in the next few weeks, and Paxton has hired high-powered Dallas attorney Joe Kendall to represent him.

Before Paxton brought Kendall on board, the attorney general was being represented by Matt Orwig and Bob Webster, two Dallas lawyers whose firms did not show up on Paxton’s most recent campaign finance report. Asked Thursday evening about the legal services listed on the disclosure, Paxton spokesman Anthony Holm said in a statement, “My belief is that none of those are related to the events in Collin County.”

[…]

State law prohibits elected officials from using campaign contributions for personal purposes. One exception, however, is when an elected official is defending a civil or criminal action brought against them in his or her “status as a candidate or officeholder.” Holm has long suggested Paxton is only facing the legal drama because he is a top-ranking elected official, while prosecutors have argued Paxton’s political stature has nothing to do with their work.

The Texas Ethics Commission issued an advisory opinion in 1995 that shed some light on how it interprets the so-called “personal use” exception. A district judge had asked the commission whether he could use campaign contributions to pay for his defense against a lawsuit stemming from his time as an attorney before he joined the court. The commission concluded that judge was in the clear as long as he had determined “in good faith that a groundless lawsuit has been filed against him solely because of his status as a judge.”

Defending oneself against felony charges can be quite expensive, as Rick Perry can attest. It will be very interesting to see if Paxton is allowed to tap into his campaign account for this, or it he’ll have to fundraise separately.