State settles retaliation lawsuit by whistleblower for $260K

Woman alleged she was punished for reporting avoided tax payments

The state of New Mexico has reached a $260,000 settlement with a whistleblower who alleged retaliation by state insurance regulators after she reported that a major health care insurer was allegedly avoiding tax payments.

An attorney for Shawna Maestas confirmed the financial settlement Wednesday after terms were published on a state clearinghouse website. The agreement ensures Maestas can seek work at other state agencies.

State Insurance Superintendent Russell Toal said both parties in the litigation agreed it made sense to reach a settlement. His leadership at the agency began in January 2020, more than a year after Maestas left in April 2018.

Maestas, who previously oversaw the state’s financial audit bureau, and two former colleagues at the Office of the Superintendent of Insurance are still pursuing the state for a 20 percent share of a roughly $18 million settlement with Presbyterian Health Plan for alleged underpayment of taxes on insurance premiums.

That case before the state Court of Appeals hinges on provisions of the Fraud Against Taxpayers Act that can provide whistleblowers who report wrongdoing between 15 percent and 25 percent of funds recovered by state prosecutors — an incentive designed by legislators to root out fraud.

Kate Ferlic, an attorney for Maestas and co-plaintiffs, said the outcome has implications for other public employees who witness corruption.

When “the Office of the Superintendent of Insurance refuses to make good on an agreement with the state, it really does have a chilling effect on other folks coming forward with valuable information that leads to the recovery of money for taxpayers,” she said.

Toal said that payment of about $1 million already was provided to the three whistleblowers for bringing insurance underpayments to light.

“Our view — which includes me — is they are not owed the money and the court ruled ... in the state’s favor,” he said of the additional payment sought on appeal.

Maestas says she first brought concerns about the alleged tax underpayments in 2015 to then-Superintendent of Insurance John Franchini and eventually to the Attorney General’s Office.

She claimed in her retaliation lawsuit that insurance regulators “overtly and covertly” attempted to stop her from exposing tax fraud and created a hostile work environment by assigning her menial tasks and an overwhelming workload.

Presbyterian Health Plan agreed in 2017 to pay a $18.5 million to resolve claims of unpaid premium taxes that dated back more than a decade. Presbyterian did not acknowledge wrongdoing and fraud charges were dismissed.

The events stoked concern that state insurance regulators favored the industry over pubic interests.

Reforms approved by the Legislature in 2018 and 2019 transferred oversight of insurance premium tax collections and enforcement provisions to the Taxation and Revenue Department, starting in 2020.