A former business associate of Allen Fletcher, the Republican state representative from northern Harris County, was arrested on March 10 in connection with an alleged stock fraud scam, following a lengthy investigation by the FBI and Harris County authorities. Fletcher was not named in the indictment, but this latest action marks for the freshman lawmaker the resurfacing of a troubling story that won’t seem to die.

Last June, texas monthly broke the story that a company owned by Fletcher had become embroiled in a stock fraud investigation (“Risky Business,” June 2009). That’s never good news for any sitting legislator, but it was uniquely embarrassing for Fletcher. A former Houston police officer who once supervised a white collar crimes unit, Fletcher had been appointed that spring to chair the House Jurisprudence Committee’s subcommittee on white collar crime. As we reported in June, federal agents raided the homes of two of Fletcher’s business associates, Nick Jarvis and Lois Newman, whom they accused of running a “pump and dump” penny stock scam, in which they allegedly duped investors into sinking money into Fletcher’s moribund burglar alarm and security guard company, known as Resource Protection Management, or RPM. A federal complaint asserted that Nick Jarvis made close to a million dollars on the alleged scam, and that he and Newman made even more on a similar penny stock scheme involving an unrelated oilfield services company called Grifco.

Fletcher was not named in the complaint or accused of a crime, and he told texas monthly last summer that he was an innocent victim of a scam he knew nothing about. But Fletcher had trouble explaining why he decided to go into business with Jarvis, a man he knew had a criminal history. Fletcher also acknowledged that he owed hundreds of thousands of dollars to various creditors or RPM investors at the time of the Jarvis deal, but said he would never have intentionally done anything illegal to get himself out of debt. Trouble seems to circle Fletcher and his modest company, which is now run from Fletcher’s home in Tomball and has only a few contracts. In 2004, Fletcher briefly went into business with Nick Jarvis’s brother, John (who also has a criminal history) but the deal went sour, Fletcher said, when John began making bogus claims about RPM in an effort to take the company public. (The same scheme, in other words, that Fletcher says Nick Jarvis duped him with a few years later.) Then, in 2007, Fletcher was sued by a Massachusetts businessman when yet another attempt to take RPM public fell apart amid accusations of fraud. (Fletcher eventually settled the suit for a modest sum, and admitted no wrongdoing.)

After the raid on Jarvis and Newman, the FBI’s “pump and dump” investigation bogged down. The pair hired top Houston defense attorney Dick DeGuerin, who convinced a judge to return millions in assets seized in conjunction with the raid. The case seemed dead until early this month, when Jarvis and two of his associates were charged with several counts of wire fraud, which carry sentences of up to 20 years each. (Lois Newman was not indicted.) The indictment focuses on the alleged Grifco scam, and does not mention Fletcher or his company.

Fletcher told texas monthly he had not heard about Nick Jarvis’s indictment, and that he had not been asked to testify before the grand jury. “I don’t know anything about it,” he said. “If they’re guilty, as an old peace officer and the only elected peace officer in the House, I hope that they suffer the fullest extent of the law.”

The last time Jarvis’s name was on a warrant, Fletcher was in the middle of his first campaign for the House. The timing is a little better this time around: Fletcher has already secured his party’s nomination for a second term. He drew no primary opponent this spring, and likewise figures to have no Democratic opponent in the fall in the heavily Republican district 130. Fletcher’s effortless return to office has caused some head-scratching around Tomball, according to city council member Derek Townsend. “A lot of people read the texas monthly story, and a lot of people were wondering, ‘What’s going on here? And why hasn’t this investigation gone any further?’”

“The majority of our members are not happy with Allen Fletcher,” said Becky Clepper, a member of the Tomball chapter of the Yellow Rose of Texas Republican Women’s Club. So why didn’t anybody run against him in the primary? According to Clepper, the answer is state senator Dan Patrick, who has emerged as the 800-pound gorilla of northern Harris County politics. Everybody in Tomball knows that Patrick, the talk radio iconoclast and first term senator, recruited Fletcher in 2008 to run against the incumbent, Corbin Van Arsdale, a political enemy of Patrick’s. Clepper, who volunteered for Van Arsdale’s campaign in 2008, said this time around nobody wanted to take the abuse Patrick heaped on Van Arsdale on his daily radio show. Patrick, who did not return calls for this story, has stood by Fletcher in the wake of his recent troubles. “Admitting he’s wrong is not in Dan Patrick’s vocabulary,” Clepper said.