Nate Paul, Investor Linked to Ken Paxton’s Impeachment, Faces Charges

Federal prosecutors have brought charges of making false statements to financial institutions against the businessman at the center of the allegations swirling around Ken Paxton, the impeached attorney general of Texas.

The man — Nate Paul, a real estate investor in Austin and a donor to Mr. Paxton’s campaign — appeared in shackles before a magistrate judge for 30 minutes on Friday morning, wearing a blue shirt, faded jeans and sneakers. He did not enter a plea, and was allowed to go home after the hearing.

Prosecutors accused Mr. Paul of exaggerating the value of his assets, telling mortgage companies and credit unions that he had more money that he actually did.

Mr. Paul was arrested Thursday afternoon by the Travis County Sheriff’s Office on behalf of the Federal Bureau of Investigation, according to jail records.

An eight-count felony indictment by a federal grand jury, unsealed Friday morning, alleges that Mr. Paul lied about his liabilities, his liquidity and the balance in his bank accounts, and that he falsified documents to obtain millions of dollars in loans that he would have otherwise been unable to obtain.

Mr. Paul has previously denied any wrongdoing in the case, and has said that the F.B.I. raid was unjustified and unlawful. A representative for Gerry Morris, Mr. Paul’s lawyer, said there would be no comment from his office.

Mr. Paul became a focus of the impeachment proceedings against Mr. Paxton last month. A majority of the Texas House of Representatives concluded that Mr. Paxton should stand trial in the State Senate on charges that included taking what amounted to bribes, disregarding his official duty, obstructing justice and abusing the public trust.

Many of the charges focused on assertions that Mr. Paxton had used his office to benefit Mr. Paul, who had given $25,000 in political contributions to Mr. Paxton’s campaign.

Dan Cogdell, one of the lawyers who will be representing Mr. Paxton when he is tried in the State Senate, said on Friday that the federal case against Mr. Paul had no connection to Mr. Paxton.

“This just shows that there is no ‘there’ there, in terms of an illegal relationship between the two men,” Mr. Cogdell said in an email. “The reality is, at least for Ken Paxton, today is a good day, not a bad one.”

Mr. Paul has had legal troubles at least since 2019, when F.B.I. agents raided his 9,175-square-foot home and his downtown offices in connection with an inquiry whose specifics they declined to disclose at the time. Investigators for a Texas House committee revealed last month that Mr. Paul had asked his friend Mr. Paxton to help him learn more about that federal investigation, a request that may have violated the state’s public records laws. And since the F.B.I. raid, Mr. Paul has been embroiled in a number of lawsuits and bankruptcy proceedings.

Mr. Paul’s appeal for help from Mr. Paxton is the aspect of the case that has attracted the most scrutiny. Investigators and whistle-blowers who spoke up about what they perceived to be abuse of power in the attorney general’s office said that Mr. Paxton arranged a meeting between Mr. Paul and the local district attorney’s office, and later appointed a special prosecutor to look into Mr. Paul’s allegations about law enforcement abuses, even though members of Mr. Paxton’s staff raised concerns that those actions might violate the rules of the office.

It also emerged that Mr. Paxton had recommended to Mr. Paul that he hire a woman with whom Mr. Paxton was having an extramarital affair, and that Mr. Paul’s company had later hired the woman as a project manager.

In March, Mr. Paul narrowly avoided spending 10 days in jail for contempt of court in a civil fraud case filed by an Austin nonprofit group that had invested in one of his enterprises. Mr. Paul was once a rising star in the booming Texas real estate industry, both in the state capital and beyond. In 2017, when he was 30 years old, Forbes called him a “real estate prodigy.” The publication estimated that the company he founded, World Class Holdings, owned $1.2 billion in real estate assets, a remarkable achievement for a young investor who at some point had amassed 10 million square feet of commercial space, including a large inventory of self-storage facilities, according to Forbes. His holdings expanded to include properties in at least 17 states from California to New York.

However, the grand jury indictment, returned on Tuesday and unsealed on Friday, alleges that between March 2017 and April 2018, he made a number of false statements in order to obtain $172 million in loans to finance his ventures.

On three occasions, the indictment says, he submitted “counterfeit” documents to create the illusion that he had millions of dollars in one bank account, when the balance in that account was actually less than $13,000.

The institutions he is accused of misleading included lenders in Austin, California, Connecticut, New York and an “Irish lender,” prosecutors said.

Conviction on a single count could bring a sentence of up to 30 years in prison and a fine of up to $1 million.

The various investigations into Mr. Paul have been accompanied by financial setbacks for him. According to The Austin Business Journal, at least 18 entities connected to World Class Holdings have filed for bankruptcy protection in recent years.

Kitty Bennett contributed research.