Demesia Padilla abruptly resigned from her job as the state’s taxation and revenue secretary on Thursday amid public disclosure that she’s under investigation for possible crimes including tax evasion and embezzlement.
Courtesy photo
Demesia Padilla
The disclosure was made in a search warrant executed by investigators from the Attorney General’s Office on Thursday for records held by the Taxation and Revenue Department.
Padilla is facing no criminal charges at this time. The investigation is ongoing.
Gov. Susana Martinez, Padilla’s boss, announced Padilla’s resignation Thursday, saying it was effective immediately. Padilla had been the taxation and revenue secretary since Martinez took office in January 2011.
“As a former prosecutor, I take any allegations of misconduct seriously and don’t believe anyone is above the law,” Martinez said in a statement released by her office. “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 she will “quickly appoint a new secretary.”
“New Mexico faces pressing issues — particularly with our budget — and that must continue to be our focus as we move forward,” the governor said.
Asked about the probe, James Hallinan, spokesman for the AG’s Office, called it “an ongoing investigation based on a public referral.”
The AG’s investigation was sparked in July 2015 by unidentified employees in the Taxation and Revenue Department who alleged “illegal and financially questionable acts,” according to an affidavit attached to the search warrant from special agent Ed Griego in the AG’s Office. Separately, State Auditor Tim Keller later referred to the AG allegations that Padilla pressured her employees in the Taxation and Revenue Department to give special treatment during an audit to the Albuquerque company Harold’s Grading & Trucking — which she worked for before becoming cabinet secretary.
Padilla has denied Keller’s allegations. A spokesman told NMPolitics.net in July 2015 that Padilla “did nothing wrong and flatly denies the allegations that she acted improperly.”
The search warrant filed by the AG’s office may indicate otherwise. The AG’s Office sought personal and business tax and employment records from 2011-2013 for Padilla and her husband Jessie Medina Jr. It also sought tax returns filed by Harold’s Grading & Trucking for the same years.
Investigators obtained records from two banks and one credit card company. They found that Padilla deposited $128,763.44 in “potential taxable income” into one account, including $47,753.64 from a company called QC Holdings, Incorporated. They found $25,360.70 in payments from Harold’s Grading & Trucking to Padilla after she became cabinet secretary that were “not appropriately documented” on required financial disclosure forms for the years 2011, 2012 and 2013, the affidavit included with the search warrant states.
And they found that Medina, who like Padilla is an accountant, had received more than $5,000 in payments from Harold’s Grading & Trucking in 2011 that wasn’t reported on Padilla’s 2012 financial disclosure form, though such disclosure was required.
“Based on the investigation and evidence conducted this far, further investigation into acts of tax evasion or similar crimes must be conducted,” the search warrant affidavit states in justifying the need to obtain the tax and employment records.
There are also questions about whether Padilla continued working for Harold’s Grading & Trucking after becoming tax secretary — which might be a conflict of interest that violates the state’s Governmental Conduct Act, according to the affidavit. Padilla told investigators the payments that came after she became cabinet secretary were for money the company owed her before the became secretary. She said her husband took over working with Harold’s Grading & Trucking after she became cabinet secretary.
But Antoinette Dominguez, the company’s current accountant, told investigators she believed Padilla continued handling the company’s finances for more than two years after becoming cabinet secretary, until February 2013, when the family that owns Harold’s Grading & Trucking learned of the payments Padilla made from the company to herself and Medina and fired her.
Whatever the case, the AG’s investigator interviewed several members of the Dominguez family, which owns Harold’s Grading & Trucking, who said the payments to Padilla after she became cabinet secretary were a surprise.
Jonathan Dominguez, who said he fired Padilla in 2013, “indicated he was furious upon learning about the unauthorized transfers of money from the business account to a Chase account” — which the AG investigator found was Padilla’s personal credit card, according to the affidavit.
“During his interview [Jonathan Dominguez] stated he believes Demesia took money from the company bank account without anyone knowing or allowing her to do so,” the affidavit states.
Harold Dominguez, Jonathan’s father, told the investigator he recalled the same meeting. He said Padilla didn’t fully explain the bank transfers but apologized for them, according to the affidavit.
Harold’s wife, Patricia Dominguez, told investigators she was “positive” that Medina, who had done her personal tax returns, never worked for Harold’s Grading & Trucking. She said she believed no one was being paid to do the businesses’ finances after Padilla became cabinet secretary in January 2011, though she later said it was possible Padilla continued working for the company until 2013, the affidavit states.
It matters in part because of Keller’s allegation that Padilla inappropriately pressured state employees to give special treatment to the company during an audit. Last July, emails NMPolitics.net obtained from the Tax and Revenue Department in response to a records request indicated that Padilla fought a penalty her office leveled against Harold’s Grading & Trucking. The department rejected the company’s protest in spite of Padilla’s pushback.
The AG investigator also documented allegations that Padilla instructed a state employee to halt the audit and asked a state employee to let her review the audit before it was completed.
So questions about whether Padilla was being paid by Harold’s Grading & Trucking when she interacted with state employees about the audit matter.
Keller, in a statement released Thursday after Padilla resigned, said there’s “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,” Keller said. “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,” Keller said.
It appears to be the work of the Office of Attorney General Hector Balderas — himself a former state auditor — that has uncovered the most serious concerns about Padilla’s actions. Griego, the AG investigator, lists in the affidavit the possible crimes under investigation as violations of the Governmental Conduct Act, fraud, forgery, embezzlement, identity theft, racketeering and money laundering.
Padilla, in a Tuesday interview with the AG’s office detailed in the affidavit, was not specific about the payments from Harold’s Grading & Trucking that were made after she became cabinet secretary, other than to say the company owed her money from before she became secretary. “When asked for more specificity regarding the payments she received, her attorney advised her not to answer,” the affidavit states.
Padilla did say she was owed “quite a bit of money” but didn’t give an exact amount. She said there were no invoices or billing statements for the amount she was owed. And her client files on Harold’s Grading & Trucking no longer exist, according to the affidavit.
After she became secretary, the affidavit states, Padilla’s previous business client files “were thrown about the storage room and in complete disarray.” Because it was “impossible to recreate the client files as they previously existed,” Padilla told investigators, she and her husband burned them.
Asked by investigators if she’d ever received compensation from QC Holdings, Incorporated, “Her attorney did not allow her to answer the question and terminated the interview,” the affidavit states.
As of the filing of the search warrant, the AG’s investigator had not been able to meet with Medina.
This article has been updated with details from the search warrant and affidavit.