SHERMAN — Texas Attorney General Ken Paxton sat in a small chair in a cold courtroom Friday and held his wife's hand.
He sat for nearly two hours, silent, while his lawyers debated federal prosecutors over whether he tricked people to invest in obsolete computers before becoming the state's chief lawyer.
When it was over, Paxton hailed the hearing as his "opportunity to begin to present my side of the case," though it left his legal future no clearer than before.
A Texas grand jury and the U.S. Securities and Exchange Commission have separately accused Paxton of acting as a secret broker for a failing technology company in the summer of 2011, when he was still a state lawmaker. The complaints that he persuaded friends, clients and business associates to invest more than $800,000 in Servergy Inc. without telling them he earned a dime on every dollar.
Those investors say their stock is now worthless, after the company's supposedly cutting-edge servers were revealed to run on outdated technology. Paxton faces 99 years in prison if convicted of the state criminal charges, and heavy fines if the SEC prevails in its civil action against him.
He has contested both cases, and came to Sherman to defend himself in the latter on Friday. His lawyers told U.S. District Judge Amos Mazzant III that the actions alleged by the SEC, even if true, do not constitute a securities violation.
His principal lawyer, Matthew Martens, lambasted the SEC's claims that Paxton intentionally misled investors in a series of emails and phone calls touting Servergy stock.
Matthew Gulde, a lawyer with the SEC, countered: "He's soliciting his friends, his business associates, his law firm clients, the members of his investment group. The people who get these things, nobody knows Mr. Paxton is being paid to send them out."
The judge seemed skeptical of the feds' argument that Paxton had legal obligations to register as a broker and reveal he was paid a commission on the stock his friends bought.
"You're basically asking me to create a new general rule ... that anybody who gets compensation in any way is automatically going to have a duty" to disclose, he said.
Mazzant made no ruling, but Paxton's lawyers said after the hearing that they took the judge's questioning as a good sign.
Paxton thanked the judge in a brief statement to reporters but took no questions.
In the hearing, the attorney general's lawyers argued that he had no legal duty to tell investors he was paid to promote Servergy.
After the hearing, a Dallas Morning News reporter asked him if he had a moral duty to tell them.
Paxton said nothing, still holding his wife's hand as he walked to the car.