Nate Paul, real estate investor in Paxton corruption allegations, found in contempt of court, ordered to jail

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Nate Paul, an Austin real estate investor who was central to allegations of illegal conduct by Texas Attorney General Ken Paxton, has been found in contempt of court, fined more than $180,000 and ordered to serve jail time by a state judge in Travis County.

In October 2020, top deputies in Paxton's agency told federal authorities that they believed the attorney general misused his authority to benefit Paul, a friend and campaign donor. Those eight top deputies were fired or resigned, but their allegations spurred an FBI investigation into Paxton that is now being led by the U.S. Department of Justice.

Paxton and Paul have denied the allegations, which were were detailed in a whistleblower lawsuit by four former Paxton deputies who claimed they were improperly fired in retaliation for reporting their suspicions to investigators.

The court-ordered sanctions against Paul came in a lawsuit between the real estate developer and The Roy F. & Joann Cole Mitte Foundation, an Austin-based nonprofit that sued Paul for fraud.

Ray Chester, an attorney for the Mitte Foundation, said his clients were pleased by the decision from state District Judge Jan Soifer, which was revealed in a letter sent Friday to lawyers for Paul and Mitte.

"We feel vindicated by the decision," Chester said, calling it "one of the steps to getting justice."

Brent Perry, Paul's attorney, said Monday he disagreed with the court's decision and will work to avoid entry of the order and to "protect Mr. Paul's interests if and when the order is entered."

According to the whistleblower lawsuit, Paxton overrode a decision by his agency's Charitable Trust Division and directed the attorney general's office to intervene in the Mitte Foundation lawsuit against Paul. "It was odd, considering that (Paxton) had never done so before or even shown any interest in a charity case,” the lawsuit said.

The whistleblowers also alleged that Paxton helped Paul gain access to investigative documents related to 2019 searches of Paul's home and business by federal and state investigators. Paul argued the searches were improper, but after agency lawyers determined that the claim was without merit, Paxton went beyond normal procedures to ensure that an outside counsel was hired to investigate, the whistleblowers alleged.

In addition, Paxton ordered a written opinion that was published at 2 a.m. on a Sunday stating that foreclosure sales had to be suspended under pandemic safety rules, which benefited Paul by delaying a foreclosure sale for one of his properties two days later, according to the whistleblowers.

In return, the whistleblowers said, Paul gave Paxton a $25,000 campaign donation, paid to remodel his home and employed Paxton's mistress. Paxton is married to state Sen. Angela Paxton, R-McKinney.

According to a Friday letter sent by a staff attorney for Soifer, the judge found Paul in civil and criminal contempt, concluding that he had offered false testimony. He was ordered to serve 10 days in jail beginning March 15.

"Mr. Paul’s flagrant lies to the Court while under oath were pervasive and inexcusable, and served to deliberately thwart the functions of the Court in enforcing its injunction," Elliott Beck, a staff attorney for Soifer, wrote in the letter.

Beck added that Paul's actions were "part of a pattern of non-compliance with court orders." Paul was fined $181,760 for violating the court order.

Last June, in an attempt to force Paul to pay the Mitte Foundation a $2 million judgment the nonprofit had won against him, Soifer issued an injunction ordering Paul to make monthly expenditure reports to the court and barring him from spending more than $25,000 at a time.

Paul did not file reports for five months, Chester said, and the Mitte Foundation asked Soifer to hold him in contempt. In a November hearing, the nonprofit's lawyers argued that Paul had paid about $960,000 to Westlake Industries, a company Paul owns, and $100,000 to Avery Bradley, a former University of Texas and NBA basketball player who had filed a breach of contract lawsuit against Paul's firm, World Class Holdings.

The nonprofit's lawyers confronted Paul with his bank records showing the $100,000 transfer to Bradley, which Paul said he did not recognize. Soifer then recessed the hearing for a week to give Paul time to gather bank records and identify all of his bank accounts, which the court said he failed to do.

The nonprofit's lawyers were able to obtain bank records for Westlake Industries, which showed a $967,000 payment on the day the injunction went into effect.

"The timing was really suspicious, and he owns 100% of Westlake Industries," Chester said.

In his letter, Beck said Paul "offered false testimony, committing perjury, sitting in the witness box just a few feet away from the Court, in responding to multiple questions by counsel and the Court."

"He lied about both transfers referenced above and he lied about his personal bank accounts, even when confronted with evidence of such accounts," Beck wrote. "He failed and refused to produce documents of such accounts, even after the hearing was recessed for a week to give him time to gather such documents."

Perry said he did not agree that the court's order required Paul to report the $960,000 transfer or that Paul lied in reference to the two transactions the court cited. He also said those transfers did not affect the Mitte Foundation's ability to collect on the judgment, should the foundation win its ongoing court case.

Chester said he is currently drafting the violation order at Soifer's direction.

The Mitte Foundation first invested a part of its endowment in Paul's companies in 2011. The nonprofit later sued Paul for breach of contract for failing to make financial disclosures.

Through one of Paul's companies, the Mitte Foundation holds part ownership in two downtown Austin buildings that are under contract for sale for a combined $172 million, of which the Mitte Foundation would get a "significant portion," according to Chester. The close of the sale was delayed by a Paul appeal, which was recently denied by the Austin-based 3rd Court of Appeals, though Paul's lawyers have several months to seek review by the Texas Supreme Court.