Texas attorney general’s office: Whistleblowers should have known settlement funding could take years

Tribune Content Agency

AUSTIN, Texas — The Office of Texas Attorney General Ken Paxton says a group of whistleblowers who sued the agency should have known it could take years to get legislative approval to fund their proposed settlement.

In a response filed with the Supreme Court of Texas on Monday, Solicitor General Judd Stone argued it’s not the agency’s fault that lawmakers may not fund the $3.3 million settlement this year and accused the four whistleblowers of “coordinating with the media” to influence the negotiations.

“Respondents knew and should have known that such approval would likely be controversial and could take at least one additional legislative session,” Stone wrote. “Respondents also should have known that large settlements or judgments can lead to disputes.”

“Nevertheless, respondents agreed to a binding [settlement] ‘contingent upon all necessary approvals for funding’ without a timing provision,” he added.

Stone added that the whistleblowers were “indisputably on notice” that lawmakers may need to meet in a special session to approve the funding. Only the governor may call a special session of the Texas Legislature.

The settlement agreement, the terms of which were announced last month, was contingent on funding approval from state lawmakers. But attorneys for the whistleblowers released a statement earlier in March stating they were returning to court after they said the agency would not agree to secure the money during the current legislative session, which runs through May.

Lawmakers meet in odd years. If funding isn’t approved now it may not be until 2025.

Key lawmakers, including Republican Speaker of the House Dade Phelan, had expressed concern about using taxpayer money to pay the whistleblowers. The four plaintiffs were fired from their high-level jobs working for Paxton after they reported him to law enforcement for allegedly using the power of his office to help a campaign donor.

They accused Paxton of swapping favors with Nate Paul, an Austin real estate developer under FBI scrutiny, in exchange for a kitchen remodel and a job for a woman with whom the attorney general allegedly had an affair.

The FBI opened an investigation into Paxton based on their allegations, which was recently referred to the Department of Justice’s national office. No charges have been filed.

Eight staffers were ultimately fired, after which four of them sued the agency in late 2020 under state whistleblower laws, alleging retaliation. The agency entered into settlement negotiations in late January and announced the terms of their pending agreement last month.

The final settlement is meant to include a line that states, “Paxton accepts that plaintiffs acted in a manner that they thought was right and apologizes for referring to them as ‘rogue employees.’” His office will also delete a press release criticizing the whistleblowers.

The document states that entering into a settlement means there is no admission of “liability or fault” by any party.

But the settlement was imperiled within weeks, the whistleblowers alleged, because the agency intended to slow-walk the funding.

In his Monday filing, Stone said the agency entered into settlement talks to save the state money. Continuing litigation would only add to the lawsuit’s costs, he wrote, and distract Paxton and the agency “from its core functions in serving the people of Texas.”

Paxton has also said he does not believe he would have gotten a fair shake from the courts in “super liberal” Travis County. His agency has paid private lawyers more than $463,000 to work on the case.

In addition to the FBI investigation and this whistleblower lawsuit, Paxton also faces active felony indictments related to allegations of securities fraud that date to his time in the Texas Legislature. A trial on the merits of that case, which has been repeatedly delayed due to storms, COVID and parallel legal battles, has not been held.