Did Padilla break law with outside work?

December 21, 2016

Among the many elements state investigators are examining in a criminal investigation into former Taxation and Revenue Secretary Demesia Padilla is whether she continued to work as an accountant for a trucking company while serving in Gov. Susana Martinez’s Cabinet. But well before her appointment, Padilla worked as a certified public accountant for the company while serving on the New Mexico Gaming Control Board, whose members at the time were paid $103,000 and by state law were barred from outside employment.

Padilla told investigators for the state Attorney General’s Office that she worked for Bernalillo-based Harold’s Grading & Trucking from 2000-10, according to a search warrant affidavit. Then-Gov. Bill Richardson appointed Padilla to the Gaming Control Board in 2007, and she served on the board until early 2011, after she was named secretary of the Taxation and Revenue Department.

What other clients Padilla may have had while serving on the board isn’t known.

How her outside work escaped scrutiny at the time, and whether others on the three-member Gaming Control Board have had other jobs, also was unknown Tuesday. The current board members and a spokesman for the agency didn’t respond to messages seeking comment.

Under state law, no member of the Gaming Control Board “may be employed in any other capacity or shall in any manner receive compensation for services rendered to any person or entity other than the board while a member of the board.” The board oversees gaming at horse racing tracks and veterans and fraternal clubs, in addition to monitoring American Indian casino compliance with state-tribal gaming agreements.

Padilla’s ties to Harold’s Grading & Trucking are at the center of the criminal investigation by the Attorney General’s Office for possible violations by Padilla of the Governmental Conduct and Financial Disclosure acts, embezzlement and tax evasion.

While secretary of the Taxation and Revenue Department, Padilla allegedly interfered in an agency audit of the trucking company’s taxes. She is being investigated in connection with more than $25,000 that she transferred to her personal credit card account from an account of the trucking company. The payments started in December 2011 and ended in January 2013; Padilla was the taxation and revenue secretary that entire time. She told investigators the company owed the money for work done before she became secretary, but company officials said they never authorized the payments.

Investigators also are trying to determine whether Padilla paid taxes on nearly $129,000 in nongovernment income deposited in a bank account.

Padilla hasn’t been charged with a crime, but she resigned last week after agents for the Attorney General’s Office seized tax records for her and her husband and other documents from the Taxation and Revenue Department. Martinez, who appointed Padilla, accepted her resignation, saying she takes allegations of misconduct seriously.

Paul Kennedy, an attorney who represented Padilla in interviews with investigators, has repeatedly declined to comment on the case.

Padilla’s online résumé on LinkedIn lists her as the owner of Demesia Padilla, CPA, an Albuquerque accounting firm, from 1989 to 2010. That period also overlaps with her tenure on the Gaming Control Board.

In 2009, also while on the board, Padilla registered a company called G&P Properties, using the same address as Demesia Padilla, CPA.

The attorney general’s investigators said in a search warrant affidavit that bank account records show Harold’s Grading & Trucking issued paper checks to Padilla for the year 2010 while Padilla worked at Padilla & Garcia, PC. That company was incorporated in 2008. On her 2011 financial disclosure form, Padilla lists herself as a 50 percent owner in Padilla & Garcia.

While Padilla told investigators that she stopped working for Harold’s Grading & Trucking in December 2010, when she was appointed taxation and revenue secretary, the family that owns the company said she was fired in February 2013 after being confronted about what the family says were unauthorized payments by the company to Padilla. The payments ended in January 2013.

Chris Sanchez, a spokesman for Martinez, said the governor was unaware of any private accounting work by Padilla while she was taxation and revenue secretary.

Asked about the governor’s policies on outside employment by her Cabinet members, Sanchez forwarded a code of conduct Martinez adopted on April 25, 2011. It requires state officers and employees to disclose in writing employment outside state government.

“Officers and employees shall not engage in any other employment or activity that creates a conflict of interest, interferes with their duties to the public, compromises their ability to discharge effectively their duties, or otherwise adversely affects the performance of their duties,” says the code of conduct.

A violation of the provision of state law prohibiting outside employment by Gaming Control Board members appears to be a fourth-degree felony, punishable by up to 18 months in prison. Board members currently earn about $86,000 a year.

David Norvell, a former state attorney general and state House speaker who chaired the Gaming Control Board during Padilla’s tenure, said that if Padilla was earning outside income, he was not aware of it. Norvell said he did not think members had to file financial disclosures with the board. He could not recall any internal agency controls to check whether members were earning outside income.

“I think it’s true that members of the Gaming Control Board were being paid by the state to take care of the Gaming Control Board,” Norvell said.

State Sen. John Arthur Smith, D-Deming, said that years ago, gaming authorities from New Jersey and Nevada advised New Mexico officials to prohibit outside employment by the board’s members and to pay those members well “because you’re inviting indiscretion if they’re volunteers.”

“There should be a restriction on outside employment because that is their job,” Smith said.

A bill was introduced in the Legislature in 2015 to make the board members volunteers and remove the restriction on outside employment. It passed the House but died in the Senate.

The Gaming Control Board opposed the bill, saying, “Employing full-time salaried board members protects the impartiality of the Gaming Control Board so those same persons do not have any financial interests other than protecting the public and the state.”

For the first few months of the Martinez administration in early 2011, Padilla served double duty as both a member of the Gaming Control Board and as the taxation and revenue secretary. Scott Darnell, then a spokesman for Martinez, told The Albuquerque Journal in an April 15, 2011, article that Padilla took over the department Jan. 1. Padilla said in the same article she was forgoing her Gaming Control Board salary while drawing her pay as secretary of the Taxation and Revenue Department.

Contact Justin Horwath at 505-986-3017 or jhorwath@sfnewmexican.com.