Texas Republican Attorney General Ken Paxton on Monday was charged with securities fraud in federal court. The U.S. Securities and Exchange Commission alleges in court documents that Paxton and one other man were paid commissions by Servergy, a technology company, “to promote the company to potential investors. Neither White nor Paxton disclosed their arrangements to prospective investors.” Servergy and its founder are also being charged.

From the court filing:

From November 2009 to September 2013 Servergy “raised approximately $26 million in private securities offerings to develop what it claimed was a revolutionary new server, the Cleantech-1000.”

“In oral and written communications with prospective investors, and in Servergy’s February 2013 Private Placement Memorandum (“PPM”), Servergy’s co-founder and then-CEO and Chairman William E. Mapp, III (“Mapp”) led investors to believe that the CTS-1000 was in high demand by falsely claiming notable companies like Amazon.com and Freescale Semiconductors had pre-ordered the product.”

“In addition, Mapp claimed the CTS-1000 consumed up to 80% less power than other servers and that it was positioned to compete with servers from industry leaders like Hewlett Packard, IBM, and Dell for use in large data centers. Mapp had no reasonable basis for these claims and failed to disclose that, in reality, the CTS-1000 was based on outdated technology that was being phased out of the industry.”

“As part of its fundraising efforts, Servergy paid Caleb J. White (“White”) and Warren K. Paxton, Jr. (“Paxton”) commissions to promote the company to potential investors. Neither White nor Paxton disclosed their arrangements to prospective investors.”

At a meeting of the sheriff’s association, Paxton said that if elected he is committed to defending state laws and envisions Texas “remaining a beacon of freedom and liberty to the nation.”

http://www.reuters.com/article/us-usa-sec-texas-idUSKCN0X825E