Friday, December 16, 2016

Scandal Rocks Martinez Administration As Taxation Secretary Resigns; Her Offices Raided; Tax Evasion, Embezzlement Alleged; What Will Demesia Say? 

Padilla and Martinez
Its been an unusually busy political December and it continued Thursday with the resignation of Secretary of Taxation and Revenue Demesia Padilla. She submitted her walking papers amid a burgeoning scandal. Journalistic warhorse Dennis Domrzalski came with this tight and eye-opening lead at the ABQ Free Press:

Padilla resigned Thursday, the day after the Attorney General’s office filed a search warrant alleging that she and her husband embezzled more than $50,000 from one of Padilla’s former clients, and that Padilla might not have reported $128,000 in income in addition to her state salary. The warrant also alleged that Padilla did work for the former client up until 2013 and didn’t report either the income or the work on her financial disclosure statement as required by state law. The warrant said that of the $128,763 in income that Padilla might not have reported, $47,753 came from QC Holdings, which “appears to be a short-term lending institution, catering to individuals needing income to sustain until their next paycheck.”

QC Holdings? A payday lending company? Say what? We offer this reader email with caution but she is a longtime reader and reliable political source:

About a year ago I was playing a slot machine at Route 66 Casino when Demesia Padilla sat down next to me. I recognized her, but did not say anything. She began small talk with me: "These slots aren't paying. Are you winning?" and I responded accordingly. This went on for about twenty minutes when my husband came up to me, saw Demesia and said, "Hello, Demesia!" She looked at him startled, looked at me incredulously, then cashed out of her slot machine. She grabbed the voucher from the slot machine and said, "I think you have me confused with someone else," and hurried off without looking back. This was after the Diana Duran debacle, so maybe she didn't want to be painted with the same brush.

Republican Secretary of State Duran resigned after pleading guilty to corruption charges that resulted from a gambling addiction. No one is saying that's the case here but the payday lending reference in the search warrant is bound to raise the issue. Well, it just did.


December has been a month fraught with peril for the Martinez administration. The Padilla scandal went viral nearly a year to the day of Susana's infamous Dec. 13. 2015 holiday pizza party replete with bottles being thrown from the balcony and the Governor intimidating hotel staff and police responding to noise. That was, as we predicted at the time, her political undoing. This month's development sounds like a death knell. Susana's nightmares must have Christmas trees in them.


Paul Kennedy
Now the fear on the Fourth Floor has to be what Padilla tells investigators as she labors to avoid a criminal indictment and/or time behind bars. Will the Governor be dragged into this? On that point, readers immediately pointed out that the former cabinet secretary has signed up an attorney who has a deep and personal connection to the Governor, Albuquerque's Paul Kennedy. Alligator analysis of that is imperative and here it is:

Paul Kennedy has been attached at the hip to Gov. Martinez throughout her two terms, and he has consistently represented Martinez in most if not all legal or potentially legal matters that have touched or come near her. He's a sharp-elbowed guy and a top-notch attorney. No coincidence therefore that Demesia Padilla's case is characterized by the kind of foot-dragging and prevaricating that is Martinez's hallmark, or that Martinez defended Padilla. Also it's no coincidence that Paul Kennedy now pops up as the attorney for Padilla et al., a sure sign that the one person he's actually protecting from flack of any kind is Gov. Martinez. An example: after vocally defending Padilla, suddenly Padilla "resigns" and there's claimed to have been no discussion between Padilla and Martinez, the world's biggest control freak. Sure. I guess you could sort of "thuthily" say there was no discussion between Padilla and Martinez if Kennedy was the conduit between them.


Here's what we see as four key political points about this scandal:

First, it is a body blow to Gov. Martinez. With her approval ratings already plummeting below 40 percent in one poll and the state budget crisis hovering over her like a dark rain cloud, this resignation casts the administration in the worst possible light. Padilla is close personally to the Governor and has been with her since Martinez took office in 2011.

Here's what is really damaging to the chief executive's credibility and that will likely cause further erosion in her approval rating. Look at what Martinez's office first said when they circled the wagons over the corruption allegations when they first surfaced last year:

We believe these 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.

Flash forward to today:

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.

But it was the auditor who waved the first red flag in 2015 and Martinez dismissed him as a political hack when she could have done something. Like the old saying goes:

"We heard you the first time, Governor." And so did the public. One reader reacted this way:

I know every once in a while a cabinet secretary goes bad, but the Guv has failed to perform her due diligence, she owns this. A reasonable executive would have gotten to the bottom of this internally when it first came to light and dealt with it. The Martinez administration is as incompetent as I have ever seen.

Second, the fact that Attorney General Balderas is pursuing tax evasion and embezzlement allegations and also investigating the charge first developed by State Auditor Tim Keller that Padilla gave preferential treatment to a taxpayer gives him some credibility on the street. There is a large faction of the Democratic Party that has said Balderas has gone way too easy on the administration. His Padilla probe will be noted if he seeks the '18 Dem gubernatorial nomination. Rep. Michelle Lujan Grisham announced this week she would run. Balderas' move Thursday was seen by insiders as perhaps slowing her momentum.

As the ink was drying on Padilla's resignation, Balderas' agents were raiding her state office seeking personal and business tax records of Padilla and her husband. Of course, a lot of the political import depends on how Balderas concludes the case. But as one of the Alligators cracked: "Hector just raided Michelle's campaign office."

Remember, when Balderas prosecuted Sec. of State Duran on corruption charges? She received only 30 days in jail, a sentence that was widely derided but the public and did not help Balderas' image as one who treads lightly when it comes to Martinez and her allies. Now he faces another test.

Third, for Keller, a likely candidate for ABQ mayor next year, it is another notch in a belt that already has quite a few.  He has emerged as the most aggressive pursuer of the administration and could reap rewards for that when the mayoral campaign gets into high gear. Balderas did not appear on TV news to talk about the scandal. That was the right call. His search warrant said it all. Keller did appear on TV and benefitted.

Fourth, this is more bad news for Lt. Governor John Sanchez who is tied inextricably to Martinez, even though they have no use for each other personally. What hurts her hurts him as he weighs a bid for the '18 GOP governor nomination. But hold on. . .Sanchez says he is now thinking of running for the ABQ congressional seat that will be vacated by Dem Congresswoman Lujan Grisham in '18. Considering the state of things in Santa Fe, it's no wonder that Sanchez is considering some kind of exit strategy from the governor's race.

Thanks for stopping by this week.

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