AUSTIN (KXAN) — Nate Paul, the Austin real estate investor at the center of the Ken Paxton impeachment, now faces new federal charges in addition to the eight he was charged with over the summer.
Federal prosecutors charged Paul, 36, with four new counts related to wire fraud, according to a release from the U.S. Department of Justice. The new counts were part of a superseding indictment, which amends and replaces the previous one.
The release said according to court documents, Paul allegedly conspired to obtain money from limited partners by falsely representing that he would isolate the partnership’s assets to be used exclusively for the benefit of the partnership.
Federal investigators allege Paul and co-conspirators routinely sent false financial statements to limited partners that inflated the partnership’s cash reserves, understated accounts receivable balances and didn’t disclose how money was moved out of the partnership for other purposes, according to the indictment.
According to the release, the scheme allowed unrestricted use of limited partnership funds.
Paul’s new charges include one count of conspiracy to commit wire fraud and three counts of wire fraud. These are in addition to the initial eight counts of false statements.
The new charges carry penalties of up to 20 years in prison with fines of $250,000 per count, according to the DOJ. Each of the eight counts in Paul’s initial June 6 indictment carries a maximum penalty of up to 30 years in prison with a fine of $1 million.
Wire fraud counts
The superseding indictment alleges Paul “repeatedly engaged in deception to persuade individuals and organizations to entrust money to him, and he has used the money to enrich himself and expand the commercial real estate business that he controls.”
As part of Paul’s business practice, his company created numerous limited partnerships beneath the main company, World Wide. The smaller limited partnerships were used to make investments in specific properties. The limited partnerships were typically named by the location’s street address, according to the indictment.
The indictment says Paul signed agreements for each limited partnership, saying his organization would act in the best interests of the partnership, keep the partnership’s business separate from others and not allow funds to be commingled with other funds.
Federal authorities allege Paul did not follow those rules and segregate limited partnership funds to be used exclusively to benefit the limited partnerships.
“Paul and his associates intended to use, and routinely did use, the funds of limited partnerships to pay expenses that were not the expenses of the limited partnerships and were instead the expenses of other companies that Paul controlled,” the indictment states.
To conceal the wrongful use of limited partnership funds, Paul and his associates provided partners with “false financial reports,” the indictment states.
Conspiracy to commit wire fraud
As part of the conspiracy to commit wire fraud charge, Paul and co-conspirators routinely transferred limited partnership funds to other World Class bank accounts and used those funds to pay expenses at other World Class companies without notifying the limited partners, the indictment states.
The conspiracy to commit wire fraud occurred from about 2011 to mid-2019, according to the indictment.
The money outflowing from limited partnerships to other World Class companies was tracked by company accountants, but those balances were not included in reports to the limited partners. Some or all of the money owed to the limited partnerships was included in those companies’ financial statements as “operating cash,” federal investigators allege.
In the case of a North Carolina limited partnership, Paul and co-conspirators submitted reports showing an accounts receivable balance of over $277,000, but the true amount was over $1.2 million. The financial report also showed over $500,000 in operating cash, while the bank account only held about $20,000, federal authorities state.
In another instance, Paul and others reported to a Florida limited partner that their accounts receivable balance was about $73,000 while the true balance exceeded $283,000. They also reported the company had over $388,000 in operating cash, but the partnership’s bank account held just $982, according to the indictment.
In the case of a Texas limited partnership called WC 4th and Rio Grande LP, Paul and others reported an accounts receivable balance of just over $11,000, but the actual balance was more than $4.3 million. They also submitted that the partnership had over $591,000 in operating cash while the bank account held less than $3,000, according to the indictment, which lists other similar instances of false reports.
A second count of wire fraud occurred on about Dec. 17, 2018. The indictment states Paul directed an associate to send a false report to a North Carolina partner via electronic mail. The report understated the amount owed to the partnership and overstated the bank account balance by hundreds of thousands of dollars, the indictment states.
A third count of wire fraud took place on May 19, 2019. Allegedly, Paul directed associates to send false reports to a Colorado limited partner that misstated the partnership’s account receivable balance and cash holdings by hundreds of thousands of dollars, according to the indictment.
Count four, another for wire fraud, says Paul directed an associate to send false financial reports to a Texas partner.
The DOJ release said a federal district court judge would if Paul is convicted, determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The FBI and State Securities Board are investigating the case. Assistant U.S. Attorneys Robert Almonte, Alan Buie and Dan Guess are prosecuting the case.
KXAN reached out to one of Paul’s attorneys for a statement and will update this story when we receive a response.
This is a developing story.