AUSTIN, Texas — What happens now that Ken Paxton’s office has settled the lawsuit filed by four whistleblowers who accused him of bribery and abuse of office?
There are a lot of questions about the agreement, who will be on the hook to pay and why Paxton’s office and the whistleblowers agreed to the settlement. The Dallas Morning News reached out to the state’s budget leaders and legal experts to get answers.
The whistleblower lawsuit dates back to late 2020, when eight high-ranking employees at the attorney general’s office went to law enforcement with allegations that Paxton had committed bribery and abuse of office. They said the attorney general flexed his official power multiple times to help Nate Paul, an Austin-based real estate developer and Paxton campaign donor.
All eight employees were fired. Four sued Paxton’s agency, alleging the attorney general retaliated against them for raising concerns. In their lawsuit, they alleged Paul secured a job for a woman with whom Paxton was allegedly having an affair and helped with a kitchen remodel for the attorney general’s home.
The FBI opened an investigation based on their allegations. The status of the federal case is unclear; no charges have been filed. Paxton has denied wrongdoing and cast the probe as a politically motivated witch hunt.
On Friday, Paxton’s agency and the whistleblowers announced they had agreed on the terms of a settlement. The agency will pay $3.3 million to the four whistleblowers and the final settlement agreement will include a line that states: “Paxton accepts that plaintiffs acted in a manner that they thought was right and apologizes for referring to them as ‘rogue employees.’”
Neither side will admit to “liability or fault” by signing the settlement.
On Wednesday, Paxton went on a conservative radio show to reiterate that he believes he did nothing wrong. He said his agency settled to stifle the suit’s rising costs and because he questioned whether he could get a fair trial in liberal Travis County.
How is the settlement going to be funded?
The Texas Whistleblower Act protects public employees who report suspected illegal behavior by their boss to law enforcement. The lawsuit was filed against the Office of the Attorney General, not Paxton himself. This is how the whistleblower law is meant to function, but it means any settlement money will be paid out of taxpayer funds and not by Paxton.
It also means state lawmakers will have to approve appropriating the $3.3 million, according to the state budget office, comptroller’s office and the Senate’s chief budgeting legislator.
“It does require legislative appropriation, which means a vote of both the Senate and the House and approval by the governor,” Sen. Joan Huffman, a Houston Republican who chairs the chamber’s finance committee, said during a legislative hearing this week.
According to the Legislative Budget Board, any amount up to $250,000 may be paid with existing appropriations and is subject to gubernatorial approval. Any amount over that must be specifically appropriated for the purpose of paying the settlement.
The funds will come from the state’s general revenue coffers and likely be detailed in a provision separate from the state budget called a “miscellaneous claims bill,” Huffman and the comptroller said. This process usually plays out at the end of the session, when lawmakers are often hashing out the year’s most contentious and divisive bills.
Many legislators served with Paxton in the Legislature, where he represented parts of Collin County in the House for a decade and for one term in the Texas Senate. Requiring their approval may open up public debates over the bribery and affair allegations against Paxton, and raise questions about whether taxpayers should foot the bill at all.
What happens if the approval fails?
Lawmakers could choose not to approve the settlement funding. If this happens, the whistleblower lawsuit will resume in state court.
Before the agreement was announced, the case had been pending before the Texas Supreme Court, which was asked to weigh in on the agency’s legal argument that Paxton and other elected officials are not subject to the state’s whistleblower laws.
Paxton hired outside counsel to defend him in the suit, spending at least $463,000 on lawyers who cost upward of $540 an hour. Those costs would continue if the suit was revived.
There is already some grumbling inside the Texas Capitol over the cost of the settlement.
Rep. Jeff Leach, a longtime friend of Paxton’s, said he is troubled by the situation.
“We have an obligation to faithfully steward every single taxpayer dollar, and part of that process is asking tough questions and demanding direct answers,” the Plano Republican, who heads the House Committee on Judiciary and Civil Jurisprudence, told The News this week.
Two House budget writers said they must know more about the settlement before approving it.
“I want to know what the upside for the state of Texas is,” said Steve Toth, R-The Woodlands, who said he’s requested a meeting with Paxton. Rep. Cecil Bell Jr., R-Magnolia, added: “It is challenging to assume the citizens of Texas are responsible for disputes between staff and the head of an agency.”
What does Paxton’s agency get out of settling?
By putting the lawsuit behind him, legal experts said Paxton can avoid time-consuming litigation and potentially embarrassing depositions.
The lawsuit made allegations about Paxton’s personal life and the way he manages the state’s law firm. Had the Texas Supreme Court allowed the case to proceed, the whistleblowers potentially could have questioned Paxton about those allegations under oath and conducted discovery.
“We don’t really know all the memos that were sent around. We don’t know internally what the attorney general has in his files,” said Michael P. Maslanka, a professor at UNT Dallas College of Law who specializes in employment law.
What do the whistleblowers get out of settling?
The whistleblowers are set to receive a $3.3 million payment from the state, and an apology from Paxton, something Maslanka called very unusual.
While the settlement does not constitute any admission of guilt, it states Paxton “accepts that plaintiffs acted in a manner that they thought was right and apologizes for referring to them as ‘rogue employees.”’
A lower-court decision that concluded elected officials such as Paxton are subject to the state’s whistleblower act will also remain in place, according to the settlement, which says no party will ask for it to be withdrawn.
“That’s important as a precedent for these plaintiffs, who put a lot on the line,” Maslanka said. “That’s important for them and that will — maybe at the end of the day after the money is spent the apology is forgotten — that precedent, that holding, will be the lasting impact.”
How does this affect Paxton’s other legal troubles?
In addition to the FBI investigation, Paxton also faces active felony indictments related to allegations of securities fraud that date to his time in the Texas Legislature.
The settlement agreement is unlikely to affect the securities fraud cases but could embolden the FBI to continue its public corruption investigation into Paxton, according to former federal prosecutor and Dallas attorney Jeff Ansley.
“There is no connective tissue there whatsoever,” Ansley said.
But the settlement may embolden the FBI to continue its probe.
“It’s certainly not an admission of any kind that can criminally be used against him. That said, it’s a statement that there was essentially a good faith basis for the referral,” he said. “It’s probably a log on the fire.”
