Texas AG Ken Paxton must testify in whistleblower case, judge rules

AUSTIN — Attorney General Ken Paxton must testify in a whistleblower case revolving around his dealings with a federally indicted Austin real estate developer, a state district judge ruled Wednesday.

The ruling delivered another legal defeat in the lawsuit involving four former top deputies who were fired after reporting their boss to the FBI. Paxton had sought to thwart the case and block subpoenas for deposition from him as well as three other top-level executives at the Office of the Attorney General.

The ruling means that for the first time, Paxton might be required to answer questions under oath about why he marshaled attorney general office resources to aid friend and campaign donor Nate Paul. The four former employees sued Paxton after the attorney general fired them for reporting him to the FBI in 2020.

Democratic Judge Jan Soifer of the 345th District Court ruled quickly in the two-hour hearing at a Travis County courthouse, telling the court that the whistleblowers had shown testimony from Paxton and his office’s first assistant, chief of staff and a top adviser would be central to their case.

Paxton’s attorneys had argued they should not sit for deposition because lower level employees would have closer knowledge of what led to the whistleblowers’ firings.

“They are not figureheads sought for deposition because of the positions they hold,” Soifer said, ruling that the whistleblowers had proven Paxton and the others likely had first-hand knowledge what led to their terminations.

After the hearing, Paxton’s attorney William Helfand would not say whether they would appeal, but the Paxtons attorneys appealed the ruling to the Third Court of Appeals in Austin on Friday. Whistleblower attorney Tom Nesbitt said he expects the attorney general to take the case to the Texas Supreme Court.

“They lost badly today. I don’t put anything past Ken Paxton,” Nesbitt said. “There’s no limit to the amount of taxpayer money he will spend to hide from accountability. So, I’m sure he’ll try some kind of appeal.”

Served notice

Paxton was served notice Wednesday around lunchtime at an Austin restaurant.

The whistleblower case against Paxton is more than three years old. The four plaintiffs are James “Blake” Brickman, Paxton’s former policy director; David Maxwell, former head of law enforcement; Mark Penley, former head of criminal justice; and Ryan Vassar, former deputy attorney general for legal counsel.

Several were part of a group of top-level executives at the AG’s office who reported Paxton to the FBI regarding his dealings with Paul, who is under indictment for wire fraud charges and other allegations related to alleged financial crimes involving his real estate firm, World Class Holdings.

The whistleblowers’ allegations include that Paxton had staff create a legal opinion to prevent the foreclosure sales of several of Paul’s properties. They allege Paxton secretly hired an outside investigator who worked hand-in-hand with Paul’s attorney to serve subpoenas on the real estate investor’s legal enemies.

The whistleblowers’ accounts formed the foundation of numerous articles of impeachment that the House approved overwhelmingly in May. The Senate cleared Paxton of all charges in September in a politically charged trial that widened a schism between Lt. Gov. Dan Patrick and House Speaker Dade Phelan.

Paxton has not been charged for his interventions into Paul’s affairs. He is under federal investigation.

At the hearing, the attorney general’s office argued further litigation in the case was improper because of an agreed upon mediated settlement agreement. Parts of the agreement have been fulfilled, including the removal of a news release calling the whistleblowers “rogue employees” from the attorney general’s website.

Texas House investigation

However, the four plaintiffs have yet to receive a $3.3 million payout. The Legislature refused to provide taxpayer dollars to fund the settlement, and the budget request triggered an investigation in the House that led to Paxton’s impeachment trial.

The case had been dormant until shortly after the impeachment verdict when the whistleblowers vowed to do what Paxton had successfully avoided at his impeachment trial: testify under oath.

Within a week, the Supreme Court of Texas lifted a hold on the case, and the whistleblowers began notifying Paxton’s attorneys of their intention to depose the attorney general.

Paxton’s office then sued to stop litigation in Burnet County but lost. Litigation then resumed in Travis County, where the original whistleblower suit was filed in 2020.

Lawyers have yet to agree to when Paxton and the others will be deposed.

But Soifer, following her ruling, said she was hesitant to place any limitations on how long they should sit for deposition or the scope of the inquiry.

Helfand also said the AG’s office will seek to depose the whistleblowers. Soifer ruled that the subpoenas for the attorney general and his staff can move forward first.