McKINNEY, Texas – Severgy founder Bill Mapp promised his company's computer servers would revolutionize the world.
"Who is Servergy?" he said during a technology conference last January. "Servergy is an engine. We're an innovation engine."
All indications now are that special prosecutors are closely scrutinizing Texas Attorney General Ken Paxton's ties to the McKinney-based technology company.
Servergy has been in the crosshairs of the Securities and Exchange Commission (SEC) for more than a year. In a lawsuit filed last year, the SEC accused Mapp and his company of making "possibly fraudulent statements or omissions related to Servergy's technology and purported business relationships."
The company raised at least $26 million from investors between 2009 and 2013, according to the SEC's filings. It also has received significant sums of money from the McKinney Economic Development Corporation.
WFAA News 8 cameras were there as Mapp entered the Collin County Courthouse this week, on the same day a grand jury was considering a possible securities fraud indictment against Paxton.
"There's no other reason for him or Servergy's lawyers to be there for that grand jury unless Servergy is involved," said John Helms, a former federal prosecutor. "My guess would be that the prosecutors may have evidence that Mr. Paxton was somehow promoting Servergy to other people."
It was Paxton's admission last year that he violated state securities laws that sparked the criminal investigation. Paxton, who was sworn in as Texas attorney general earlier this year, acknowledged in May 2014 that he solicited clients for an investment company without being registered with the state securities board. He described it as an administrative error, and paid a $1,000 fine.
Special prosecutor Kent Schaffer has previously said that they expect to present a case alleging that Paxton violated the law by failing to register with the state, a third-degree felony.
Paxton's spokesman has repeatedly said that this was merely a civil matter and not a crime. He has pointed out that Paxton had been registered in the past with the securities board, which indicates there was no intent not to register.
Helms said that is actually not a bad argument.
"If he was registered from time to time, that makes it seem like it was more of an oversight," Helms said. "But on the other hand, that's something that he's supposed to know about, and, in fact, he signed a bill [to] require that kind of registration."
Schaffer first revealed to News 8 in early July that the Texas Rangers investigating the case had unearthed new evidence against Paxton involving losses well in excess of $100,000. He has said prosecutors planned to seek a first-degree securities fraud indictment against Paxton. He declined to discuss the specifics of what the Rangers had uncovered, and said it was unrelated to the earlier situation.
To indict someone for securities fraud, Helms said prosecutors "would have to show that securities were being sold to people through misrepresentations, in the form of telling people things that are not true or failing to tell people things about their investment."
Reports filed with the Texas Ethics Commission (TEC) show Paxton owns at least 10,000 shares of Servergy.
In legal filings, Paxton's last name was singled out as a search term in the SEC probe. Other than Paxton's ownership of Servergy stock, his links to Servergy are not readily apparent.
The SEC began investigating the firm based in Paxton's hometown in 2013. The SEC issued subpoenas in 2013 and 2014. The commission filed suit against Servergy in late 2014, seeking to force the company to turn over company records because the agency was withholding communications with investors and prospective investors.
Mapp also made a $250 donation to Paxton's campaign a day after the SEC lawsuit was filed — the first donation he had ever made to a candidate in the State of Texas.
The SEC's lawsuit detailed some of Servergy's alleged transgressions.
In a January 2013, Mapp emailed an investment advisor — who got commissions for referring investors to Servergy — the following: "Many BIG exciting updates including: we just got our first order from Amazon."
In another email from the same month to a prospective investor, Mapp wrote that the company was "getting ready to ship our first unit to Amazon." The next month, he wrote to another advisor getting commissions that Servergy continues to "take in preorders [...] This includes Amazon."
Only the SEC says that's not true: There were no pre-orders from Amazon.
Instead, the filing says that an Amazon employee had bought the server for his own "personal use and had specifically informed Servergy that he was acting personally and not on behalf of his employer."
The legal filing also contended Servergy "overstated the capabilities of its products."
News 8 reached out to dozens of investors listed in the SEC documents.
Lewis Abronski, an Alabama investor, said he invested $50,000 two years after attending a lunch meeting. He said Paxton had nothing to do with his purchase of the stock.
"They send me a letter every once in a while that tells me good things are on the horizon," said Abronski, 94. "At that time, it sounded really rosy, but a lot of these things do."
He did not seem hopeful he'd ever get return on his investment.
Gary Garner, another investor from Alabama, described himself as a "very unhappy" investor.
"It looks like I will never get my money back," he told News 8. "It was kind of sold to us that you will get 10 times your money back, and maybe 20 times."
Garner would not say how much he invested, but he said the minimum buy-in was $50,000.
"I don't usually take out my wallet and light a match to it," he said.
That hasn't been Servergy's only problems.
In October 2013, around the same time that the SEC probe began, a group of investors led by State Rep. Byron Cook, R-Corsicana, and former State Rep. Bob Griggs filed suit, demanding that Servergy open up its books for inspection. The suit accused Servegy of failing to comply with "multiple records to inspect the books and records of Servergy."
"Plaintiffs had individually and collectively invested hundreds of thousands of dollars in Servergy," the suit said.
The lawsuit was dismissed a year later, after Servergy complied with the request.
But that's not all.
Laura Kayata, head of political action committee McKinney Watchdog, is asking questions, too. She wants to know why the McKinney Economic Development Corporation (MEDC) gave Servergy more than $100,000 in taxpayer money.
"My issue with it is that they gave them money not once, but a second time — even after Servergy was already in the process of being investigated — and that kind of makes you wonder what the criteria are for accountability," Kayata told News 8.
Kayata made the connection between Servery and the economic development corporation when she noticed they had offices in the same building as Servergy. She filed an open records request, and was the first to find out that Servergy had received city money.
According to documents obtained by News 8 through an open records request, Servergy first came to the MEDC with a proposal in 2010 that it would receive $50,000 a year in rent subsidies for moving its company here from California.
"We are very excited about bringing Cleantech from the Silicon Valley to North Texas," Bill Mapp wrote in a letter, according to documents obtained through an open records request.
The economic development corporation signed an agreement with Servergy in 2011, promising to give the company $50,000 in rent subsidies for two years. The loan would be forgiven, if the company complied with the terms of the agreement.
The MDEC signed another $50,000 agreement with the company last summer, around the same time the SEC was demanding company documents. Again, the loan would be forgiven, if Servergy complies with the terms of the agreement.
According to city check ledgers, the last payment to the company for its rent subsidy was last month, for more than $4,000.
In a statement to News 8, the economic development corporation says it first "became aware of the SEC investigation in to Servergy when it was reported in the media earlier this month."
"Servergy has met the legal terms of the loan agreement with the MEDC, and the MEDC is honoring the agreement," the statement said. "No findings of an investigation have proven the terms of the loan agreement have been violated."
Translation: The payments will continue.
"Maybe we should start having the question: 'Are you under investigation?'" Kayata said. "'What is your business model? Can we look at your books?'"
