Paxton Took $100K From Businessman Investigated For Medicaid Fraud To Fund Own Criminal Defense

State Attorney General Ken Paxton accepted a gift of $100,000 from the head of a company his office investigated for Medicaid fraud. The money was earmarked to pay for Paxton's own criminal defense on securities fraud charges.

In his declaration to the Texas Ethics Commission, Paxton identified James Webb of Frisco, Texas as a "family friend." But Webb is also the founder of Preferred Imaging, LLC. Last week, the company agreed to pay more than $3.5 million to settle a whistleblower lawsuit, following a joint investigation by the U.S. Justice Department and Paxton's Medicaid fraud unit.

Paxton's office says federal prosecutors took the lead in the investigation, and that the attorney general had no direct involvement.

Attorney Andrew Cates, the editor of Texas Ethics Laws, says the state ethics commission would have a tough time taking action against Paxton over the gift. "In February, they brought forward a draft advisory opinion that addressed almost all of this entirely, and after a lot of debate, and a lot of consideration, they declined to issue the advisory opinion. If you rely on an Ethics Commission opinion and end up with a complaint or end up with a lawsuit, that is a defense to prosecution," Cates says.

Paxton is charged with two felony counts of securities fraud. He is accused of deceiving investors in a high-tech startup while he was serving as a state legislator. Webb's gift amounts to nearly a third of the money collected for Paxton's legal defense.