Four years after North Texas home builder Scott Sherman completed a federal prison sentence for mortgage fraud, his new construction materials business received a $600,000 cash infusion.

The financial boost came from a blind trust set up to prevent Texas Attorney General Ken Paxton and his wife, state Sen. Angela Paxton, from any overlap in their personal investments and their actions as elected officials. But previously unreleased records from the attorney general’s 2023 impeachment investigation show the trust was far from blind and did not shield the Paxtons from its business dealings, including the investment in Sherman’s business.

Before long, Wildcatter Sand Services and Grayson County Sand and Gravel, which Sherman built with his father, grew into a vast enterprise with various locations and subsidiaries. And along the way, some of those businesses stopped paying taxes to local governments, including school districts.

But as their tax debts stacked up, Wildcatter companies wired the Paxtons tens of thousands of dollars in the months leading up to and during the attorney general’s impeachment on charges of corruption and bribery. Paxton was eventually acquitted by the Legislature and is now in an expensive and tight race for a U.S. Senate seat against Democrat James Talarico, a state lawmaker.

While Paxton has been in public office for more than two decades, the blind trust he established upon becoming attorney general has largely obscured his business dealings. The Paxtons’ investment in Wildcatter through that trust offers a new, previously unreported look at both the limits of that trust and the attorney general’s financial association with the very type of business executives whose prosecutions he typically celebrates.

“In Texas, we fight fraud head-on and will not rest until every last corrupt actor is brought to justice,” Paxton said in a news release last year. In a recent social media post linking to a newly released campaign ad, he wrote, “As Attorney General, I’ve made big pharma and fraudsters pay billions.”

Doing business with a recently convicted felon undermines that narrative and erodes public trust in his role as the state’s top anti-fraud watchdog, ethics experts told ProPublica and The Texas Tribune.

Richard Painter, who served as the chief ethics lawyer for President George W. Bush, said he would have thought “the attorney general of Texas would have the good sense not to be dealing with a convicted felon.”

“They’ll pay out their friends while they’re not paying their taxes, run up debt,” said Painter, who has been critical of staunch Paxton ally President Donald Trump. “But the question is, why is the attorney general of Texas dealing with those kinds of people?”

Ken Paxton did not answer detailed questions from the news organizations about the Wildcatter investment or whether he knew of Sherman’s conviction. He has previously defended his business dealings, saying he follows ethics laws. A spokesperson for Angela Paxton, who filed for divorce last year, said that she was not aware of Sherman’s criminal history.

Sherman ran a homebuilding firm, Artisan Operating LP, when he pleaded guilty in 2014 for his role in a mortgage fraud conspiracy. The scheme involved artificially inflating home prices to obtain larger loans for more than two dozen properties in cities across the Dallas-Fort Worth area. Sherman did not respond to calls........

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