AUSTIN (KXAN) – Embattled Austin real estate investor Nate Paul – a donor and ally to impeached Attorney General Ken Paxton – has been charged in federal court with eight counts related to making false statements and false reports to mortgage lending companies and credit unions, according to court records released Friday.

Each count carries a maximum penalty of up to 30 years in prison and a fine of up to $1,000,000 if convicted, the Department of Justice said in a press release. 

Gerry Morris, one of Paul’s attorneys, told KXAN that Paul denies all allegations and will be pleading not guilty. 

Paul was arrested and jailed in Travis County on Thursday on a federal warrant, according to news reports and a spokesperson for the Travis County Sheriff’s Office.

The alleged violations happened between March 2017 and April 2018, the Department of Justice release stated.

The charges include two counts of making a false statement and report to a insured state-chartered credit union and six counts of making a false statement and report to a mortgage lending business.

False statements and reports

On one occasion, investigators said Paul gave a counterfeit document to a financial institution that indicated one of his bank accounts held over $14 million when the balance was actually less than $13,000, according to an indictment.

Investigators said, on several occasions, Paul under-represented his liabilities and over-represented his cash reserves. In one instance, he falsely represented that he indirectly held 100% interest in a company, the indictment states.

The indictment provides precise details of instances in which Paul allegedly provided false statements to lenders while applying for loans. In one case, investigators said Paul showed a credit union he had a $31.6 million cash balance in bank statements even though just $500,000 was cash. The remainder was securities, according to the indictment.

In another instance, while seeking a $15 million loan from an Irish bank, Paul listed his total liabilities as $3.4 million, when “Paul knew … he owed, directly or indirectly, at least $28,620,000 in addition,” the indictment states.

By falsely claiming to indirectly hold 100% of the limited liability company Silicon Hills Campus, Paul secured a $64 million loan from a New York bank that was used to buy “158 acres and several buildings in northwest Austin,” according to the indictment.

The government is seeking forfeiture of Paul’s properties related to the criminal allegations, $172 million and substitute assets if the properties can’t be recovered. Paul has been released on the condition that he surrender his passport, which his attorney said in court Friday he has already done. Paul was granted the ability to travel domestically, but he must notify the court and provide an itinerary.

The government also asked for special conditions on his release, including that he can’t retaliate against any witness or threaten to do so, according to court statements.

Paul made his initial court appearance before U.S. Magistrate Judge Dustin Howell of the U.S. District Court for the Western District of Texas. He will be arraigned in his next court appearance on June 15 at 11 a.m.

Paul’s business and personal dealings with Paxton are intertwined with the attorney general’s impeachment and a pending whistleblower lawsuit. It isn’t clear if any of Paul’s legal issues are tied to the complaints against Paxton.

Nate Paul legal issues

The legal issues Paul now faces have been brewing for years.

In 2018, Paul donated $25,000 to Paxton’s campaign. In 2019, federal agents raided and searched the headquarters of Paul’s main business World Class Holdings. World Class is the overarching entity under which Paul operates dozens of businesses that control an array of real estate properties.

Forbes reported in 2017 that Paul’s companies had amassed upward of $1.7 billion in real estate assets across the country. KXAN reported in 2020 that Paul’s companies were associated with over 50 properties in Travis County valued at over $444 million, according to Travis Central Appraisal District records.

In September 2020, a group of Paxton’s top attorneys filed a complaint against him, alleging Paxton engaged in bribery, abuse of office and had intervened in cases to benefit Paul.

Roughly a month later, in November 2020, four of the complaining lawyers sued Paxton for wrongfully terminating them and retaliation.

Paxton agreed to settle the whistleblower case for $3.3 million. In March, Paxton requested the legislature approve the payment of state money to resolve the case. Lawmakers said that payment request triggered a probe by the House General Investigating Committee that uncovered violations of law and ethical obligations by Paxton and ultimately led to his impeachment.

Through court filings in the whistleblower case, and a separate civil case involving World Class companies and a charitable trust, the relationship between Paul and Paxton has become clearer and the origins of allegations tying the two together have emerged.

Just last month, the Travis County Tax Office listed Paul as their top delinquent taxpayer, saying he owes more than a million dollars in taxes on six properties.

Impeachment allegations

Several of the issues Paxton faces in his impeachment are linked to assistance he allegedly provided Paul, including in a civil case between Paul’s company World Class and the Mitte Foundation – a charitable trust. The Mitte Foundation invested about $3 million in World Class Holdings in 2011, according to House General Investigating Committee testimony.

World Class refused to allow Mitte to inspect certain financial records in the partnership, which sparked litigation, according to House investigators. Against the advice of at least two of his top agency attorneys, Paxton directed his office to intervene in the case to the benefit of World Class. The Office of Attorney General is supposed to represent the public’s interest and protect charitable trusts, House investigators said.

“General Paxton, in this instance charged with protecting Texas charitable foundations, disregarded his duty and improperly used his office, his staff, his resources, to the detriment of the Mitte Foundation and to the benefit of a single person, Nate Paul,” a House investigator testified.

Two articles of impeachment accuse Paxton of “constitutional bribery.” In one article, Paxton is accused of benefiting from Paul’s employment of a woman Paxton had an extramarital affair with. Another article says Paxton was the beneficiary of home renovations done by Paul.

In a separate article of impeachment, Paxton is accused of using his employees to prepare an opinion that helped Paul avoid foreclosure sales on his properties. Paxton used the chair of a Senate committee to serve as a “straw requestor” for the opinion, according to the articles of impeachment.

Paxton is also accused of disregard of official duty and misuse of official information, for obtaining information from his office that was not publicly disclosed for the purpose of benefitting Paul, the articles of impeachment state.

In addition, Paxton misused his official powers by employing an outside attorney who investigated a baseless complaint and filed over 30 grand jury subpoenas to help Paul, according to the articles of impeachment.

The House impeached Paxton on May 27 by a vote of 121 to 23. The Senate will act as the court for the impeachment case.