Court ruling suggests recent activity in federal investigation of Ken Paxton

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A federal appeals court last week rejected an unnamed Texas agency’s attempt to withhold records and shield its employees from appearing before a grand jury in a federal investigation that appears to be targeting Attorney General Ken Paxton.

The ruling appears to be the first major sign that federal officials are still investigating Paxton after he was impeached and subsequently acquitted by the Legislature last year over charges of bribery and abuse of office.

In a June 20 opinion, the federal Fifth Circuit Court of Appeals sided with a decision from the lower Western District of Texas, which found that the state agency could not use attorney-client privilege to withhold evidence from a Department of Justice inquiry into “alleged wrongdoing by senior Agency personnel.” The appeals court also cleared the way for two senior agency employees to testify before a grand jury on July 2.

The opinion does not identify the agency. But it refers to a years-long FBI investigation and notes dates and details that line up with a sealed federal case probing allegations from Paxton’s former top deputies. In October 2020, those deputies reported to federal authorities that the attorney general allegedly took bribes to benefit a friend and political donor, Austin real estate developer Nate Paul.

The case at issue in the Fifth Circuit opinion also remains sealed. But the opinion refers to earlier orders that seem to align with those issued in Paxton’s case, including an August 2021 decision that largely refused the agency’s attempt to limit the scope of the investigation.

Last month, the Texas Newsroom published an August 2021 order from U.S. District Court Judge David Ezra, of the Western District, that appears to be the same one referenced in the Fifth Circuit’s latest opinion. For example, the 2021 Western District ruling notes that investigators in Paxton’s case were allowed to take “additional investigative steps” to seek “four categories of information,” including any “actions or communications contemplated or undertaken” by Paxton or his senior staff to “interfere in or obstruct” the federal investigation. The Fifth Circuit’s opinion refers to the same language, including the same “four categories of information.”

Ezra’s 2021 order states that the grand jury investigation “concerns Paxton’s alleged use of his official position and power” to benefit Paul, “as well as Paxton's purported efforts to thwart” the inquiry. The order also says federal officials are probing “several potential federal crimes involving Ken Paxton,” including obstruction of justice, retaliation against witnesses, bribery, honest services wire fraud and “conspiracy to commit the four aforementioned offenses.”

Paxton’s office did not immediately respond to a request for comment. He has denied wrongdoing across all his legal cases.

The Fifth Circuit's opinion said the unnamed agency — apparently Paxton's office — argued in court filings that Justice Department officials, in scrutinizing possible moves to retaliate against witnesses, were running afoul of the Tenth Amendment by "attempting to police the hiring and firing practices of a state agency."

Last week's opinion, penned by Trump-appointed Fifth Circuit Judge Cory T. Wilson, notes that federal officials are still looking into any moves by the agency to “interfere in or obstruct” the federal investigation. Such communications, Wilson wrote, are not covered by the usual “seal of secrecy” between lawyer and client.

Wilson’s opinion also states that the lower court has “reiterated several times” that it agrees with Justice Department officials who contend there is “reason to believe that evidence of federal crimes alleged in [DOJ’s] motion is in the possession, custody, or control of current and former employees” of the state agency.

Wilson, in his opinion, wrote, “we cannot say that the district court erred in its determination on this point.”

The Fifth Circuit ruling is the first sign of potential trouble for Paxton following a recent spell of wins, which included his impeachment acquittal and the end of his long-running indictment on three felony counts of securities fraud. Prosecutors earlier this year agreed to drop the fraud charges under a deal that required Paxton to pay restitution to those he was accused of defrauding.

Both developments were seen as major vindications for Paxton, who was once seen as a political liability within his party amid the weight of his legal baggage. He has since emerged as a leading figure in the Texas GOP's ascendant hardline flank, which sees Paxton as a conservative warrior who has withstood political persecution. Paxton has openly entertained the idea of challenging U.S. Sen. John Cornyn in the 2026 Republican primary, and his most powerful ally, former President Donald Trump, said last month he would consider tapping Paxton for U.S. attorney general if he wins a second term in the White House.

Meanwhile, Paxton continues to face a whistleblower lawsuit in state court from the deputies who said they were illegally fired for reporting Paxton to law enforcement. He is also contending with a separate lawsuit from the state bar seeking to penalize him for attorney misconduct.

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