December 15, 2016

TRD Secretary Padilla resigns after AG’s search warrant

State Taxation and Revenue Department Secretary Demesia Padilla resigned from her position today, according to media reports.

Padilla’s resignation came after New Mexico Attorney General Hector Balderas filed a search warrant on her house related to an investigation into allegedly aiding an ex-client by using her position as TRD head.

Padilla worked as a certified public accountant before Gov. Susana Martinez appointed her to the helm of TRD in 2011.

Related: The key parts of the Demesia Padilla search warrant

The search warrant sought Padilla’s personal and business income tax returns from 2011-2013, among other information, stemming from an anonymous referral sent to the Attorney General’s Office in July 2015 “alleging illegal and financially questionable acts” as well as a referral from State Auditor Tim Keller.

The warrant also sought tax records from Jessie Medina Jr. According to the New Mexico Secretary of State’s Office, Jessie Medina was listed as an officer of Padilla’s private accounting firm. The search warrant also names Medina as Padilla’s husband.

Earlier that year, Keller released a preliminary investigation concluding that Padilla used her office to give preferential tax treatment to a former client of hers. While Keller’s report didn’t disclose the name of Padilla’s former client, NM Political Report was the first news outlet to confirm the business in question was Bernalillo-based Harold’s Grading and Trucking.

The allegations involving Harold’s Grading and Trucking is also identified in the Attorney General’s search warrant.

Related: Read the search warrant that led to Demesia Padilla’s resignation

According to the warrant, a Harold’s employee noticed numerous payments going to a credit card belonging to Demisia and Medina. The same employee told an AG investigator that Padilla was terminated by Harold Trucking’s after it was discovered money was being transferred to Padilla’s credit card.

The warrant also states that Padilla had more than $128,000 in income not related to her job as a state cabinet secretary. More than $47,000 of that came from QC Holdings Inc., a payday lender.

The warrant also states that Padilla told the AG investigator she stopped working for Harold’s in 2010, but continued to receive payments from the business for a previous amount owed.

Keller’s office also previously released an internal TRD email showing that Padilla requested Harold’s Trucking be relieved from paying a tax penalty in 2014. She reasoned this by stating that her own firm had tax lost documents relevant to Harold’s Trucking and that, because of this, her former client’s “negligence penalty should be abated.”

At the time, TRD spokesman Ben Cloutier defended Padilla’s request as “simply a short letter, attesting to the facts” and argued that Harold’s Trucking “would have been discriminated against and denied a basic right given to all other taxpayers” without it.

James Hamill, a CPA at Albuquerque-based Reynolds, Hix & Co., however told NM Political Report that this situation presented a conflict of interest.

“Most people would have referred the client to three different people that they knew to be competent and have those folks handle the audit,” Hamill said last December.

“It’s the difficulty of the folks in Tax and Rev who are handling the audit to have their boss write on behalf of a client,” Hamill continued. “It just puts them in a difficult situation.”

Martinez, who previously defended Padilla’s conduct, released a statement to the Albuquerque Journal confirming Padilla’s resignation.

“As a former prosecutor, I take any allegations of misconduct seriously and don’t believe anyone is above the law — that is why I ordered the tax department to fully cooperate with the Attorney General’s Office during the course of their investigation,” Martinez said in a statement to media outlets including the Albuquerque Journal.

“There is no place for abuse of power from the highest ranking officials in the Administration. Our office’s preliminary investigation into Secretary Padilla raised a number of deeply troubling allegations of actions that put our state revenue and whistleblower employees in jeopardy,” State Auditor Tim Keller said in a statement. “We refused to sweep it under the rug in the face of intense pressure due to the fact that she was a powerful official appointed by the Governor. With help from our partners in accountability, we hope New Mexicans will now have a tax department that is run fairly and competently.”

Martinez’s office and Cloutier, who previously criticized this reporter for finding the name of the company in a botched redaction of a TRD document he released to media, have not returned phone calls and emails seeking comments on Padilla’s resignation.

Last summer, a TRD spokesman said the allegations “are nothing more than unsubstantiated claims that are being driven by disgruntled former employees, who either work for the State Auditor or were fired for sexual harassment.”

UPDATE (2:30 p.m.): Added context about Demesia Padilla’s attempt to relieve Harold’s Trucking from tax penalties.

UPDATE (2:50 p.m.): Added a statement by State Auditor Tim Keller.