Indicted Texas AG took $100k from imaging CEO under investigation for fraud

Texas Attorney General Ken Paxton, who is facing three counts of felony securities fraud, accepted a $100,000 gift to fund his defense from the head of an imaging company his office was investigating for Medicaid fraud, according to the Associated Press.

The money came from James Webb, president of Preferred Imaging, amounting to almost a third of the $330,000 Paxton raised to help pay his legal fees. On July 22, Webb’s company agreed to a $3.51 million settlement over allegations it improperly billed Medicaid and Medicare for services, like those involving the administration of contrast dye, without having a physician on-site as required.

According to the AP, employees at the Texas Attorney General’s office are prohibited from taking gifts from any entity “the employee knows is under investigation” by the office. The announcement of the Preferred Imaging settlement said the office’s Medicaid fraud division was among several agencies which conducted the probe.

Paxton’s office, however, told the Dallas Morning News there was no conflict of interest in taking the gift because he didn’t know about the investigation into Webb’s company, and multiple parties, including the U.S. Attorney’s office and Steve Sumner, the attorney for the whistleblower in the case, said Paxton’s office was mostly involved in negotiating the terms of the settlement.

"The vast majority of damages in this case were federal in nature, and typically, when that is the case, federal agencies take the lead in the investigation," Kathy Colvin, a spokesperson for the U.S. Attorney's office in Dallas, told the Morning News. "In this case, the role of the Texas state attorney general's office, in the investigation and settlement, was very minimal. It was primarily in support of establishing the state's loss."

Sumner said he wished he knew about the gift from Webb to Paxton earlier, but also said he and his whistleblower client remain pleased with the settlement.