Balderas sues Presbyterian, claims it owes N.M. millions in back taxes

Insurer denies allegations of fraud, violations of state code

State prosecutors say one of New Mexico’s biggest health insurance companies has dodged tens of millions of dollars in taxes. But Presbyterian Health Plan rejects the allegations by Attorney General Hector Balderas, who filed a lawsuit Tuesday accusing the company of fraud and violating the state’s insurance code.

The lawsuit comes after an audit last year found the state had failed to collect more than $193 million in back taxes from several major insurance companies, leading the state auditor to accuse regulators of relying on what amounted to an honor system and angering legislators struggling with a budget crisis.

The civil case filed Tuesday in state District Court in Santa Fe could be just the first of several as state officials continue to review years’ worth of tax filings from several other insurers.

“When insurance providers break the rules, they must face consequences,” Attorney General Hector Balderas said in a statement. “My office is working with the State Auditor to make sure that Presbyterian — and any other companies that engaged in similar fraudulent conduct — are held responsible for the serious injuries imposed on New Mexican taxpayers.”

In denying the allegations, Presbyterian maintains that independent firms as well as state agencies have audited the company’s taxes multiple times.

“Presbyterian has served New Mexico for 108 years,” spokeswoman Melanie Mozes said in an email. “We take our responsibilities as citizens very seriously and we are confident that we have acted in good faith and with the intent to comply with our legal obligations and responsibilities.”

Charging that Presbyterian “has engaged in a 15+ year fraudulent enterprise to avoid responsibility for tens of millions of dollars to which New Mexico taxpayers are entitled,” the lawsuit centers on taxes that insurance companies are required to pay the state on health care premiums.

Under an agreement to cover Medicaid patients, the state paid Presbyterian enough money to offset the costs of those taxes. But the Attorney General’s Office charges that the company still filed for credits to recoup the very same taxes.

The Attorney General’s Office claims that in 2001, for example, Presbyterian improperly claimed more than $330 million in Medicaid premiums, leading to a $9.4 million deduction on its state taxes. The lawsuit, which also charges that the company claimed tax credits years after deadlines, spans tax returns filed by the company between 2001 and 2015.

The Attorney General’s Office also asserts

that Presbyterian, under a separate scheme, failed to report nearly $21 million in other payments from the state on its taxes from 2014-16.

The private, locally based not-forprofit company now covers nearly 457,000 New Mexicans under its health plans in addition to running a system of eight hospitals around the state.

The Attorney General’s Office says it is reviewing allegations that other major insurers underpaid taxes, and State Auditor Tim Keller has launched a separate review.

Economists and state lawmakers had long suspected the state was not receiving all the money it should from taxes on premiums charged by companies that sell health, life, property, title or vehicle insurance.

The Office of the Superintendent of Insurance is supposed to collect that money. But its chief, John Franchini, said after an audit last year that he, too, realized the state was collecting far less in taxes than it should have from major insurers.

“I knew we were short; I knew we were gamed by many companies,” he told lawmakers in September, adding that he had been working to collect back taxes from insurers.

Franchini previously had filed his own enforcement action against Presbyterian for taxes and penalties not paid in 2010. And legislators as well as the state auditor asked last year that the attorney general review taxes paid by the company.

“We are hopeful that this lawsuit does not hinder our progress toward uncovering any and all premium tax underpayments due to the state of New Mexico,” Franchini said in a statement Tuesday.

The case comes after whistleblowers in his own office filed sued Presbyterian under the Fraud Against Taxpayers Act. Balderas’ office decided to take up the allegations made in that case, which was sealed, and pursue the charges on behalf of the state.

The lawsuit asks a judge to fine Presbyterian as well as require the company pay back the tax credits it was allegedly paid improperly.