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Did Paxton’s “midnight opinion” save Nate Paul from foreclosures?
“I am in my 44th year of banking, and this was the first time I’ve seen something of this nature,” says impeachment trial witness
From left: Nate Paul and Ken Paxton (Photo Illustration by Steven Dilakian for The Real Deal with Getty)
If you’ve been following the trials of Nate Paul and World Class Holdings — inside and outside the courtroom — over the past few years, then you’re probably familiar with the Midnight Opinion.
The letter, issued by the office of Attorney General Ken Paxton in the summer of 2020, found that building foreclosure sales could not take place outdoors due to Covid restrictions. It was unusual for several reasons: The state had recently limited most pandemic rules as it looked to “re-open”; it was an “unofficial opinion,” not the traditional, more formal legal guidance the office regularly issues; and it happened to be released less than two days before several of Paul’s properties with delinquent loans were set to be auctioned off.
In the years since its release, the letter has been a flashpoint in the ongoing saga over an alleged inappropriate relationship between Paxton, the state’s chief law enforcement officer, and Paul, one of its most prominent real estate developers.
The contents of the letter and its fallout have been extensively reported, but during testimony this week at Paxton’s impeachment trial, new details emerged about how the letter confused at least one of Paul’s lenders and threw the foreclosure process into disarray.
On Tuesday, Amplify Credit Union president and CEO Kendall Garrison took the stand to shed light on how the lender attempted to foreclose on three of Paul’s properties in 2020.
The assets were spread across the Texas Triangle: Warehouses at 639 Lanark Drive in San Antonio, the IHOP at 707 East Cesar Chavez Street in Austin and a shopping center at 2010-2070 West Spring Creek Parkway in Plano.
By the summer of 2020, Paul had stopped paying the loans on the properties, and Amplify had notified Paul of its intent to foreclose on at least one of the properties. In turn, Amplify requested a trustee and filed notice with the counties where the properties were located. They intended to foreclose on the first Tuesday in August.
But on Aug. 3, the day before the scheduled foreclosure sale, Paul emailed Amplify a copy of the unofficial opinion, which the lender later called internally “the midnight opinion” due to its last-minute appearance.
“I’m writing to confirm you’re aware of the attached announcement,” Paul wrote. “Please confirm before 5:00 pm today that you will not be attempting to proceed with a foreclosure tomorrow.”
An attorney for Amplify responded that, while it did not think the letter applied to their foreclosure attempt, they would postpone it anyway.
“We had no choice other than to pull those foreclosure filings,” Garrison testified. “I am in my 44th year of banking, and this was the first time I’ve seen something of this nature.”
Amplify held onto the notes, and that September, sold them roughly at par to entities controlled by Bayne Commercial.
In its cross-examination, the defense showed that Amplify had failed to properly notice some of the foreclosures, throwing some mud in the gears of the prosecution’s arguments. (A foreclosing entity needs to make notice of the sale 21 days before the scheduled auction date.)
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Since the start of the trial, the two sides have battled over whether the attorney general’s opinion letter actually did anything of value for Paul. The defense’s argument has been that Paul received nothing of significance from Paxton, including the letter.
“No bankruptcies were averted. No foreclosures were stopped,” Tony Buzbee, an attorney for Paxton, said in his opening statement. But the prosecution has made the case that in a foreclosure battle, a little extra time and confusion is more than enough.
“Who benefitted from the foreclosure letter?” Erin Epley, an attorney for the prosecution, asked Garrison at the end of his testimony.
“Nate Paul and the World Class entities,” Garrison said.
“Pass the witness,” Epley said with a grin.