Securities Fraud Charges Against Texas Official Headed to Trial

State and federal law enforcement officials filed securities fraud charges against the Texas attorney general (AG) in 2015. The state criminal charges, along with a federal civil claim, relate to alleged acts that pre-dated the defendant’s election to the office of AG in 2014. The case has been controversial in both a political and a legal sense. All politics aside, the case is notable as an example of the multiple ways law enforcement can pursue certain alleged white-collar criminal offenses. State law allows criminal prosecution, and federal law allows both civil and criminal proceedings.

In a very general sense, our judicial system is divided between civil and criminal matters. In criminal cases, prosecutors employed by the government bring charges against defendants. They have the burden of proving the defendant’s guilt beyond a reasonable doubt, the highest burden of proof in our justice system. Civil cases involve lawsuits between one or more plaintiffs and one or more defendants. The plaintiff must prove the elements of their cause of action by a preponderance of evidence. This is a lighter burden of proof than the one prosecutors must meet.

Some counties in Texas maintain separate courts for civil and criminal cases, while other trial courts handle both types. Rather than a single state supreme court, Texas also maintains two high courts. The Texas Supreme Court hears appeals of civil cases, while the Texas Court of Criminal Appeals handles criminal appeals. Federal courts handle both civil and criminal cases, from district courts up to the U.S. Supreme Court. The cases involving the Texas AG are currently pending in a state district court in Collin County that handles both civil and criminal matters, as well as a federal district court in Sherman.

The federal and state cases relate to the AG’s involvement with a technology company based in Texas, which allegedly raised about $26 million in private equity investments during a period from November 2009 to September 2013. The federal government’s complaint names several additional defendants and therefore describes a broader set of alleged facts than the state criminal charges. The allegations generally involve making misleading statements with regard to securities offerings, failing to disclose material facts, and failing to register with state regulators.

In July 2015, a grand jury in Collin County indicted the AG on three counts under the Texas Securities Act, including two counts of failing to disclose material facts in connection with the offer for sale of securities in an amount involving at least $100,000, a first-degree felony, Tex. Rev. Civ. Stat. § 581-29(C); and one count of rendering services as an investment advisor without registering with the Texas Securities Commission, a third-degree felony, id. at § 581-29(I).

The federal case, filed in the U.S. District Court for the Eastern District of Texas in October 2016, references the state criminal charges in its detailed outline of the allegations against the defendant. It asserts three causes of action:

– Securities fraud under both the Securities Act and the Securities Exchange Act, 15 U.S.C. §§ 77q(a), 78j(b);
– Violations of the Securities Act’s anti-touting provisions, id. at §§ 77e(a), (c); and
– Failure to register as a broker with the Securities and Exchange Commission, id. at § 77q(b).

These blog posts are meant to be illustrative only. Unless expressly stated to the contrary herein, these matters are not the result of any legal work of Michael J. Brown, but are used to communicate a particular point of view. Michael J. Brown does not claim credit for any legal work done by any lawyer or law firm either generally or specifically, with respect to the matters contained in this blog.

For over two decades, board-certified white-collar crime lawyer Michael J. Brown has advocated for people’s rights in state and federal criminal cases in West Texas. Contact us online or at (432) 687-5157 today to schedule a confidential consultation to discuss your case with an experienced legal professional.

More Blog Posts:

SEC Files Securities Fraud Claims Against Bitcoin Mining Companies, Texas Criminal Lawyer Blog, April 22, 2016

SEC Rejects Constitutional Challenge in Securities Fraud Case, Texas Criminal Lawyer Blog, December 23, 2015

Manager of Mortgage Finance Company Convicted in Federal Court of 28 Counts of Fraud, Texas Criminal Lawyer Blog, October 23, 2013


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