LAS CRUCES — The cabinet secretary of the state Human Services Department testified Wednesday that he didn’t know of allegations of widespread fraud in the processing of food benefits applications within his department until they first became public in April.

Nine employees previously testified in federal court in April and May about HSD’s practice of adding fake assets to emergency applications for the federal Supplemental Nutrition  Assistance Program (SNAP), formerly known as food stamps.

“I would never tolerate that or direct that,” Earnest said.

Related: After deadline, HSD report on alleged SNAP fraud still not finished

Earnest and his attorneys emphasized that HSD took immediate action end to put an end to the practice by sending a directive to employees reminding them to follow federal law and initiating an internal investigation of the matter.

The remarks are Earnest’s first public comments about when he first found out about the alleged practices that have rocked his department for the past two months.

The testimony came as part of the Hatten-Gonzales lawsuit accusing HSD of mishandling SNAP and Medicaid processing that dates back nearly 30 years. The federal lawsuit was filed in 1988 and settled in 1990 with a court-ordered consent decree that outlined what the state department must do to comply with federal law in benefits processing.

Attorneys for the Center on Law and Poverty, as well as attorney Daniel Yohalem*, who has represented plaintiffs in the lawsuit independently for 20 years, argued HSD still isn’t meeting the terms of this consent decree more than two decades later.

Both sides gave closing arguments Wednesday on a motion for the federal court to appoint an independent monitor to direct HSD’s benefits processing. The arrangement is known as a receivership.

“This is what it’s come to,” Gail Evans, an attorney with the Center, argued in court.

More than faked SNAP applications

The allegations of fraud in processing SNAP applications are just one of many issues with benefits attorneys identified to support their arguments.

Evans argued that HSD also isn’t complying with federal law when it comes to processing applications for immigrants. Specifically, HSD imposed a five-year residency requirement for immigrants to qualify for federal benefits, even though that rule conflicts with federal law.

Evans noted that HSD previously appealed court rulings ordering the department to comply with immigration law and lost.

On the witness stand, Earnest cited several initiatives HSD made under his leadership to comply with the consent decree. They included recently restructuring the department’s compliance team and pressing the judge to appoint a “special master” to oversee consent decree compliance.

Part of restructuring the compliance team Earnest spoke about included demoting Marilyn Martinez from director of the Income Support Division, which oversees SNAP. Martinez invoked her Fifth Amendment rights 39 times in May on the stand, refusing to answer questions about her alleged role in the SNAP fraud practices.

Martinez’s demotion came days before Wednesday’s hearing.

Earnest did not mention Martinez’s involvement in the alleged fraud and instead said that he “didn’t feel she was the right person to bring us forward.”

Earnest also mentioned the department’s work with MAXIMUS, a company that works with public health agencies like HSD. Earnest said HSD was working with MAXIMUS to put benefit applications at a sixth-grade reading levels, among other initiatives.

At that point, Yohalem cited an HSD email he obtained showing that the state agency’s contract with MAXIMUS expired June 30.

This led to a tense exchange.

Yohalem pressed Earnest to admit that HSD isn’t under contract with MAXIMUS. Earnest said he was not aware of the contract expiring and responded multiple times that the department would contract again with MAXIMUS if it had to.

Paul Kennedy, who represented HSD in the hearing, objected to Yohalem’s attempt to enter the email as an exhibit because of the short notice. Federal Magistrate Judge Carmen Garza agreed with Kennedy.

The email also said, according to Yohalem, that HSD didn’t have money budgeted for the current fiscal year for a renewed MAXIMUS contract.

Independent monitor vs. special master

While attorneys for the Center argued for an independent monitor, HSD made the case for the alternative special master.

The special master would be a full-time employee who HSD attorneys emphasized would be independent, unbiased and report updates on consent decree compliance to the court every two months. In a brief exchange with NM Political Report outside the courthouse, Earnest said both HSD and the plaintiffs in lawsuit would weigh in on deciding who the potential special master would be.

But Evans said such a special master would amount to a consultant who only has the power to recommend decisions to HSD.

Earnest and HSD attorneys, however, warned that a receivership would only lead to more problems.

“It’s hard for me to envision that this would be a quick and easy remedy,” Earnest said in court. “I think it would actually slow progress.”

Earnest cited an “inherent conflict” that would arise if a monitor in charge of one part of HSD wanted to cannibalize resources from the other parts of the department.

“You cannot make a decision for one part of the department without affecting another,” Earnest said, arguing that things work best when one cabinet secretary stays in charge.

At the end of the hearing, Garza said she’d make her decision on appointing a monitor or special master “as soon as we can.”

In his closing arguments, HSD attorney Christopher Collins argued attorneys for the plaintiffs failed to successfully meet the legal burden to require a receivership. But he did acknowledge one thing.

“The department has failed to meet all the court-ordered deadlines,” Collins said. “But we are trying, and we are working hard.”