Former Martinez’ cabinet secretary faces embezzlement charges in court

Demesia Padilla looked very much like a woman who did not want to be in court.

The former state Tax and Revenue Department secretary and certified public accountant sat next to her attorney, Republican counsel-of-choice Paul Kennedy, in a windowless room at the Santa Fe Magistrate Court normally reserved for things like traffic tickets.

Padilla, however, faces far more serious charges and the potential of more than 24 years in prison.

Prosecutors say that from December 2011 to January 2013, Padilla systemically embezzled more than $25,000 from a former client in her private accounting practice, then used her position as a cabinet secretary in Republican Gov. Susana Martinez' administration to try to undermine an audit of the client, Harold's Grading and Trucking. They also believe Padilla was working as a private accountant during the time she was running the Tax and Revenue Department.

The state has charged Padilla with three felonies, including using her office for personal financial gain, embezzlement, and using a JP Morgan Chase computer system to pay her credit card bills from the Bank of Albuquerque account of her former client. The 58-year-old also faces five related misdemeanor charges.

Monday morning, prosecutors began what's expected to be a week-long effort to convince a judge that they have enough evidence to take Padilla to trial. Santa Fe County Magistrate Court Judge Donna Bevacqua-Young will make that decision once the state wraps its case and once Padilla and Kennedy have the chance to question witnesses.

Proving the crimes may be a laborious process. Because Kennedy wouldn't stipulate to the relevance of bank account statements from Harold's Grading and Trucking, and of credit card statements from Padilla's Southwest Rapid Rewards credit card with JP Morgan Chase, prosecutors spent the first part of the hearing's first morning in the tedious process of admitting into evidence 45 separate bank and credit card records, laying the same legal groundwork for each separate record.

The exactitude seemed to take its toll on Padilla, who listened as Beverly White, a records official with JP Morgan Chase's subpoena processing center in Indianapolis, unknowingly and repeatedly mispronounced her name "Da-MEE-shuh Puh-DIL-la," hitting the L's. When a prosecutor gently acknowledged the error on her surname, Padilla whispered toward Kennedy, "And it's Demesia."

Padilla hasn't entered a plea, though she has contested the charges publicly.

On Monday, Harold Dominguez, owner of Harold's Grading and Trucking, and his wife Patricia both testified that when they hired Padilla to keep their books and do their taxes, they gave her broad access to their business and their finances.

"We treated her like family," Harold Dominguez told the mostly empty courtroom, adding that he would typically feed Padilla on Sunday afternoons after she came in to work on the company's books at the home-based business. Padilla had gate codes, garage codes—everything, prosecutors pointed out, except for permission to create an online profile to access the Bank of Albuquerque account. The email address used to register the account, according to prosecutors, was "demesiap@aol.com."

Kennedy spent time questioning another JP Morgan Chase official about how the company verified the identity of the person requesting payment from a non-Chase bank account (like that of Harold's Grading and Trucking) to Padilla's credit card account some 40 times. Ken Grier, who works at the company's offices in Delaware, said anyone with access to both an outside account and the credit card account could set up an electronic payment.

"[The electronic record] won't necessarily tell you who was at the computer, will it?" Kennedy asked Grier, who agreed.

Prosecutors pushed back, saying Dominguez hired Padilla in part because they weren't interested in keeping their own books. Not only that, but both Harold and Patricia Dominguez testified that they had little computer know-how.

"Would you say you're technologically savvy?" asked Assistant Attorney General Derek Skinner.

"Not really," said Harold Dominguez.

"How often do you get on the computer to access the internet?" Skinner asked.

"I don't even know how to do it," replied Dominguez, who is in his 70s.

The company had fallen behind on its taxes before, Dominguez testified, but he had no idea how much it owed when Padilla was handling the books. He testified that he had to take out a $78,000 loan to pay backtaxes and fines, and to keep cutting paychecks to the company's 14 employees.

"We stopped paying ourselves," Dominguez said.

When the state's tax auditors began to dig in October 2014, prosecutors believe Padilla did all she could to use her cabinet position to block the audit and escape more than $13,000 in fines that she might have owed. By the summer of 2015, anonymous tips were made to both the Office of the State Auditor and the Governor's Office. The auditor's tip led to the investigation. Martinez spokesman Ben Cloutier did not respond to a request for comment from SFR.

The case began in District Court, where it will continue if Judge Bevacqua-Young decides there's enough evidence for a trial. District Court Judge Mary Marlowe Sommer had a scheduling conflict that prevented her from hearing the evidence, so she opted to send it to Magistrate Court rather than delay the matter.

It's the third time that, in a big public corruption trial, the attorney general has opted to seek charges through a preliminary hearing in open court rather than a from a grand jury. Both former Senator Phil Griego and former Secretary of State Dianna Duran also had a judge determine there was enough evidence to proceed to trial.

"Grand Jury proceedings are not open to the public," said office spokesman David Carl. "When bringing felony charges against appointed and elected officials, the [Office of the Attorney General] prefers the transparency of public preliminary hearings when logistically possible."