Paxton an Investor in Company Under SEC Probe

_{Correction appended*}

The name of Attorney General Ken Paxton, facing potential indictment by special prosecutors in Collin County for first-degree felony securities fraud, has surfaced in a federal probe of a company in which he is an investor.

The investigation, first reported late Tuesday by The Associated Press, centers on whether McKinney-based Servergy defrauded investors with false claims about the sales of its data servers and their technological capabilities. According to court filings by the U.S. Securities and Exchange Commission, the company is suspected of "potential misstatements" about having preorders for the servers from the online retailer Amazon and the semiconductor giant Freescale — and in assertions that the product needed up to 80 percent less cooling, energy and space compared with other servers on the market.

Paxton's email address appears with about 70 other contacts in one list of search terms in a subpoena of Servergy from the SEC. His name is also included in an October 2014 letter from Servergy to the SEC describing the search terms used to produce the documents the company turned over in response to a subpoena.

According to Paxton's 2014 personal financial statement filed with the Texas Ethics Commission, he owns at least 10,000 shares in the company. The SEC filings do not indicate why it is seeking documents involving Paxton or the scores of other investors and additional parties.

The attorney general is currently under investigation for financial fraud by the state. Two special prosecutors appointed after the Collin County District Attorney recused himself from the case announced last week they are pursuing a first-degree felony charge against Paxton, and a grand jury will be asked whether to indict him. The State Securities Board fined Paxton $1,000 last May, after he admitted he had solicited investment clients for a friend and business partner without properly registering with the state.

Last week Paxton hired heavyweight Dallas criminal defense lawyer Joe Kendall, a former federal judge, to lead his defense team. Calls to Kendall, and Paxton spokesman Anthony Holm, were not immediately returned Tuesday.

Patrick Svitek contributed reporting to this story.

*This story originally misstated how the special prosecutors were appointed. They were appointed by a judge after Collin County District Greg Willis recused himself from the case.