New Mexico Department of Workforce Solutions v. Beebe

UNITED STATE BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: DAVID BEEBE, Case No. 15-10909-j7
Debtor.
NEW MEXICO DEPARTMENT OF
WORKFORCE SOLUTIONS,
Plaintiff,
v. Adv. No. 15-01054-j
DAVID BEEBE,
Debtor.
MEMORANDUM OPINION
Plaintiff, New Mexico Department of Workforce Solutions (the “Department”), objects to
the dischargeability of debt pursuant to 11 U.S.C. §§ 523(a)(2)(A). The Department claims that
the defendant/debtor, David Beebe (“Debtor”), willfully misrepresented his employment status to
obtain unemployment benefits he was not entitled to receive. After consideration of the evidence
admitted at trial, arguments of the Debtor and counsel for the Department, and applicable law, the
Court finds and concludes that Debtor’s $15,584.93 debt to the Department is non-dischargeable
pursuant to 11 U.S.C. §523(a)(2)(A).
I. Procedural History.
On April 9, 2015, Debtor filed his voluntary petition for relief under Chapter 7 of the
Bankruptcy Code. See Bankruptcy Case No. 15-10909-j7, Docket No. 1. On July 10, 2015, the
Department initiated this adversary proceeding by filing its Complaint to Determine
Dischargeability of Debt (the “Complaint”). See Docket No. 1. Debtor timely filed an answer to
the Complaint. See Docket No. 4. On July 29, 2015, the Court entered an order granting Debtor
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 1 of 17

- 2 -
a discharge under 11 U.S.C. § 727. See Bankruptcy Case No. 15-10909-j7, Docket No. 21. The
same day, Debtor’s bankruptcy case was closed, leaving this adversary proceeding as the lone
pending matter associated with the bankruptcy case.
II. Findings of Fact.
In accordance with Fed. R. Civ. P 52(a)(1), made applicable by Fed. R. Bankr. P. 9014, the
Court finds the following facts:
A. The Department.
The Department is the administrator of the New Mexico’s unemployment insurance
compensation system. See N.M.S.A. 1978 § 51-1-2. The Department receives and processes
claims for unemployment insurance benefits.1 The Department receives funds for the
administration of New Mexico unemployment insurance compensation system from employer
payroll taxes. The Department separately maintains an additional fund with funds received from
the United States Department of Labor, which the Department uses to provide extended benefits
to claimants who are no longer eligible to receive standard benefits. In processing claims for
unemployment insurance benefits, the Department screens the claimants for monetary eligibility
and non-monetary eligibility.
Whether filing online or by telephone, a claimant is presented with an Eligibility Benefit
Rights Information Statement (the “EBRI Statement”). See Department’s Exhibit 4. Claimants
must acknowledge that they understand the EBRI Statement before proceeding with their claim.
The EBRI Statement provides, in part, as follows: “Total gross wages (before taxes) must be
1 The Department reviews the claims and is charged with determining the claimants’ monetary and non-monetary
eligibility to receive unemployment insurance benefits based upon the statutory criteria. A claimant is monetarily
eligible for unemployment insurance benefits where he/she has worked for wages in at least two of the last six quarters
prior to filing a claim. See N.M.S.A. 1978 § 51-1-5(A)(5). A claimant’s non-monetary edibility is based on a variety
of factors including current employment status. See generally N.M.S.A. 1978 § 51-1-5.
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 2 of 17

- 3 -
reported for any work you perform during each week as you work for the money not as you get
paid. You will report these GROSS wages each week that you certify your weekly claim for
benefits.” Department’s Exhibit 4. For each week a claimant requests benefits, the claimant files
with the Department, either online or by telephone, a certification responding to twelve questions.
The Department uses the claimant’s weekly certifications to determine the claimant’s non-
monetary eligibility for benefits for that week. The sixth question on the weekly certification is:
“Did you work for cash, wages, or anything of value during this week?” Department’s Exhibit 7.
If the claimant responds “yes” to the sixth question, the claimant is asked to provide the gross
wages earned during that week, the name of their employer, whether the claimant is still working
for that employer, the reason for separation from that employer, whether the claimant was fired or
quit, and whether the claimant’s earrings that week were from military duty. See id.
B. Debtor’s claim for unemployment insurance benefits.
On March 21, 2010, Debtor filed an Unemployment Insurance Claim for Benefits (the
“First Application”) with the Department. See Department’s Exhibit 5. In the First Application,
Debtor represented that he had worked for Fidelity Employer Services LLC from January 29, 2009
through March 26, 2010; Celico Partnership from September 1, 2008 through January 1, 2009; and
Sprint/United Management Co from April 1, 2007 through May 1, 2008. Debtor further
represented that he was not then “able and available to accept permanent full-time or part-time
work” because of transportation and other problems. See id. Debtor represented that he worked
for $503.20 in wages the week he completed the First Application. See id.
Two weeks after submitting the First Application, Debtor submitted his first weekly
certification. See id. Debtor certified that he earned no wages for this week and received benefits
of $291.00. See Department’s Exhibit 6. With four exceptions, Debtor made weekly certifications
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 3 of 17

- 4 -
to the Department that he earned no wages for any week thereafter through the week ending March
19, 2011.2 See id.
On March 20, 2011, Debtor filed a second Unemployment Insurance Claim for Benefits
(the “Second Application”). See Department’s Exhibit 5. In the Second Application, Debtor
represented that he worked for Fidelity Employer Services LLC from March 26, 2010 through
January 29, 2009; Robert Half International, Inc. from January 3, 2010 through January 4, 2010;
and T-Mobile US USA Inc. from January 1, 2010 to January 2, 2010. See id. Less than a month
after filing the Second Application, the Department contacted Debtor seeking clarification
regarding his employment history. See Debtor’s Exhibit 2. Initially, Debtor responded that he had
not worked for Robert Half International, Inc. in over two years and that he had never worked for
T-Mobile US. See id. Debtor later retracted that statement and asserted that he had forgot that he
worked for both employers. See id. Debtor further represented that he was then “able and
available to accept permanent full-time or part-time work.” Debtor represented that he did not
work for cash, wages, or anything of value the week he completed the Second Application. See
id. The week ending March 26, 2011 was a waiting week for which Debtor certified that he earned
no wages. See Department’s Exhibit 6. From the week ending April 3, 2011 through the week
ending December 17, 2011, Debtor certified that he earned no wages for any of those weeks. See
id. On September 26, 2011, the Department sent a Notice of Monetary Determination to Debtor.
See Debtor’s Exhibit 4. The Department informed Debtor that he had “been determined eligible
to receive temporary extended unemployment compensation benefits.” Id. The Department
further informed Debtor that “you must however be unemployed thru [sic] no fault of your own.”
Id.
2 Debtor made no certification the weeks ending November, 6. 2010, November 13, 2010, November 27, 2010, and
December 4, 2010.
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 4 of 17

- 5 -
In total, Debtor received $23,296.00 in standard unemployment insurance and extended
coverage benefits between March 21, 2010 and December 17, 2011.
C. Debtor’s employment history.
Debtor was employed and worked for wages for several weeks during the subject period.
From July 13, 2010 through September 8, 2010, Debtor was employed by Robert Half
International, Inc. See Department’s Exhibit 9-A. Debtor eared a total of $3,254.25 in wages
during that period. See id. From October 4, 2010 through March 19, 2011, Debtor was employed
by T-Mobile US. See Department’s Exhibit 13-B. Debtor earned a total of $10,826.94 in wages
during that period. See id. From March 21, 2011through December 17, 2011, Debtor was
employed by The Kemtah Group. See Department’s Exhibit 13-C. Debtor earned a total of
$23,254.50 in wages during that period. See id.
Below is a chart summarizing Debtor’s certification and employment history for the
relevant period3:
Week End
Date
Wages
Reported Employer
Gross
Wages
Earned
Workers
Comp.
Benefits
Received
3/27/2010 500.81 Fidelity Employer Services LLC 500.81 0.00
4/3/2010 0.00 0.00
4/10/2020 0.00 291.00
4/17/2010 0.00 291.00
4/24/2010 0.00 291.00
5/1/2010 0.00 291.00
5/8/2010 0.00 291.00
5/15/2010 0.00 291.00
5/22/2010 0.00 291.00
5/29/2010 0.00 291.00
6/5/2010 0.00 291.00
6/12/2010 0.00 291.00
6/19/2010 0.00 291.00
3 The chart was compiled using Department’s Exhibits 6, 8, 9, 13.
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 5 of 17

- 6 -
6/26/2010 0.00 291.00
7/3/2010 0.00 291.00
7/10/2010 0.00 291.00
7/17/2010 0.00 Robert Half International, Inc. 406.25 291.00
7/24/2010 0.00 Robert Half International, Inc. 208.00 291.00
7/31/2010 0.00 Robert Half International, Inc. 429.00 291.00
8/7/2010 0.00 Robert Half International, Inc. 440.00 291.00
8/14/2010 0.00 Robert Half International, Inc. 352.00 291.00
8/21/2010 0.00 Robert Half International, Inc. 440.00 291.00
8/28/2010 0.00 Robert Half International, Inc. 352.00 291.00
9/4/2010 0.00 Robert Half International, Inc. 440.00 291.00
9/11/2010 0.00 Robert Half International, Inc. 187.00 291.00
9/18/2010 0.00 291.00
9/25/2010 0.00 291.00
10/2/2010 0.00 291.00
10/9/2010 0.00 T-Mobile US4 605.88 291.00
10/16/2010 0.00 T-Mobile US 605.88 291.00
10/23/2010 0.00 T-Mobile US 604.25 291.00
10/30/2010 0.00 T-Mobile US 604.25 291.00
11/6/2010 No Certification T-Mobile US 608.71 0.00
11/13/2010 No Certification T-Mobile US 608.71 0.00
11/20/2010 0.00 T-Mobile US 712.54 291.00
11/27/2010 No Certification T-Mobile US 712.54 0.00
12/4/2010 No Certification T-Mobile US 667.91 0.00
12/11/2010 0.00 T-Mobile US 667.91 291.00
12/18/2010 0.00 T-Mobile US 648.20 266.00
12/25/2010 0.00 T-Mobile US 648.20 266.00
1/1/2011 0.00 T-Mobile US 607.40 266.00
1/8/2011 0.00 T-Mobile US 607.40 266.00
1/15/2011 0.00 T-Mobile US 561.61 266.00
1/22/2011 0.00 T-Mobile US 561.61 266.00
1/29/2011 0.00 T-Mobile US 97.79 266.00
2/5/2011 0.00 T-Mobile US 0.00 266.00
4 Department’s Exhibit 13-B contains the most detailed information on Debtor’s wage earning history with T-Mobile
US. It consists of earnings statements showing the amount earned and the number of hours worked, including the
number of hours worked overtime, in two-week periods. Nothing in these records identifies how much of the wages
were earned in a given single week. For most of the two-week periods, Debtor worked well over 40 hours and received
no or very little overtime pay. However, beginning with the two-week period ending February 5, 2011 and continuing
through the remainder of Debtor’s employment with T-Mobile US the number of hours worked was so low that the
Court cannot find that wages were earned in both weeks of the two week period. For two-week periods where the
number of non-overtime hours worked were substantially more than 40, the Court finds that Debtor earned wages in
both weeks and has split the wages evenly between those weeks. Otherwise, the Court has presumed all wages were
earned in the first of the two weeks.
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 6 of 17

- 7 -
2/12/2011 0.00 T-Mobile US 209.27 266.00
2/19/2011 0.00 T-Mobile US 0.00 266.00
2/26/2011 0.00 266.00
3/5/2011 0.00 266.00
3/12/2011 0.00 T-Mobile US 390.54 266.00
3/19/2011 0.00 T-Mobile US 0.00 266.00
3/26/2011 0.00 T-Mobile US 96.38 0.00
The Kemtah Group 600.00
4/2/2011 0.00 T-Mobile US 0.00 270.00
The Kemtah Group 420.00
4/9/2011 0.00 The Kemtah Group 555.00 270.00
4/16/2011 0.00 The Kemtah Group 600.00 270.00
4/23/2011 0.00 The Kemtah Group 600.00 270.00
4/30/2011 0.00 The Kemtah Group 600.00 270.00
5/7/2011 0.00 The Kemtah Group 600.00 270.00
5/14/2011 0.00 The Kemtah Group 360.00 270.00
5/21/2011 0.00 The Kemtah Group 600.00 270.00
5/28/2011 0.00 The Kemtah Group 600.00 270.00
6/4/2011 0.00 The Kemtah Group 600.00 270.00
6/11/2011 0.00 The Kemtah Group 397.50 270.00
6/18/2011 0.00 The Kemtah Group 600.00 270.00
6/25/2011 0.00 The Kemtah Group 690.00 270.00
7/2/2011 0.00 The Kemtah Group 600.00 270.00
7/9/2011 0.00 The Kemtah Group 600.00 270.00
7/16/2011 0.00 The Kemtah Group 600.00 270.00
7/23/2011 0.00 The Kemtah Group 600.00 270.00
7/30/2011 0.00 The Kemtah Group 600.00 270.00
8/6/2011 0.00 The Kemtah Group 600.00 270.00
8/13/2011 0.00 The Kemtah Group 600.00 270.00
8/20/2011 0.00 The Kemtah Group 600.00 270.00
8/27/2011 0.00 The Kemtah Group 675.00 270.00
9/3/2011 0.00 The Kemtah Group 675.00 270.00
9/10/2011 0.00 The Kemtah Group 525.00 270.00
9/17/2011 0.00 The Kemtah Group 645.00 270.00
9/24/2011 0.00 The Kemtah Group 592.00 270.00
10/1/2011 0.00 The Kemtah Group 592.00 270.00
10/8/2011 0.00 The Kemtah Group 528.00 270.00
10/15/2011 0.00 The Kemtah Group 640.00 270.00
10/22/2011 0.00 The Kemtah Group 640.00 270.00
10/29/2011 0.00 The Kemtah Group 640.00 270.00
11/5/2011 0.00 The Kemtah Group 656.00 270.00
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 7 of 17

- 8 -
11/12/2011 0.00 The Kemtah Group 624.00 270.00
11/19/2011 0.00 The Kemtah Group 640.00 270.00
11/26/2011 0.00 The Kemtah Group 880.00 270.00
12/3/2011 0.00 The Kemtah Group 400.00 270.00
12/10/2011 0.00 The Kemtah Group 640.00 270.00
12/17/2011 0.00 The Kemtah Group 640.00 270.00
Total Benefits received: $23,296.00
Debtor certified that he earned no wages a total of 87 weeks. The Department paid Debtor
either standard unemployment insurance or extended coverage benefits a total of 84 weeks. Debtor
earned wages in 65 of the 84 weeks for which he certified that he earned no wages. The
Department paid Debtor a total of $17,285.00 in benefits in reliance on those false certifications.
Debtor knew that he had worked for wages during each preceding week that he made a false
certification. Debtor knew that the Department would rely on his certifications to determine
whether and in what amount he was eligible to receive benefits. Based on this, the Court infers
that Debtor intended for the Department to rely on his false certifications so that he could obtain
benefits he was not eligible to receive. The Court further infers that Debtor intended to deceive
the Department into believing that he was eligible to receive benefits. Debtor argues that he
believed he was still eligible to receive benefits despite his employment because of letters he
received from the Department informing him that he was monetarily eligible to receive benefits.
See Debtor’s Exhibit 4. Debtor’s testimony and argument on this issue was not credible. Debtor
knew he was required to report all earnings. See Department’s Exhibit 7. Debtor knew that his
eligibility to receive benefits in any particular week depended on whether and how much he earned
in wages that week. See id. If Debtor honestly believed that he was still eligible for benefits
despite earning wages, he would have had no reason to falsely certify that he had earned no wages
in those weeks.
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 8 of 17

- 9 -
For reasons described below, the Court finds that the Department’s reliance on Debtor’s
false representations was justifiable.
D. The Department’s anti-fraud procedures
The Department has procedures designed to identify potentially fraudulent claims. Most
fraud investigations initiated under these procedures result in a determination that the Department
overpaid the subject claimant. One procedure used is to cross match a claimant’s certification that
he or she did not earn wages for a particular week against employer submitted payroll tax records.
Employers must submit quarterly payroll tax records one month after the end of each quarter. See
11.3.400.404 NMAC. The cross matching procedure is not fool proof. Occasionally, the
Department fails to identify a match between a claimant receiving benefits and a person listed in
an employer’s records. Additionally, the Department accepts tips from the public regarding
potentially fraudulent claims. When the Department uncovers a mismatch between a claimant’s
certifications and employer records or receives a tip of a potentially fraudulent claim, the
Department generates a report. The Department then assigns the report to one of its investigators.
Investigators conduct investigations on a first in, first out basis. Several factors influence the delay
between report generation and investigation initiation. Some of those factors are staffing, number
of claimants, and the number of fraud reports in the que. Currently, the delay is approximately
two weeks. In 2010 and 2011, the Department experienced a drastic increase in claims and
potential fraud reports. During that time, the delay between report generation and investigation
initiation was more than one year. The Department’s investigation of reports typically lasts a few
months.
An investigator begins an investigation by delivering questionnaires to the claimant’s
suspected employer(s). The questionnaire requests the claimant’s history of employment with that
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 9 of 17

- 10 -
employer, including dates of employment and wages earned by week. See Department’s Exhibits
9-A, 9-B, and 9-C. Simultaneously, the investigator delivers a letter to the claimant informing the
claimant of the investigation. See Department’s Exhibit 10. The letter requests that the claimant
disclose all employment during the subject period. See id. After reviewing this information, the
Department makes a determination of whether the claimant received overpayment of
unemployment insurance benefits. See Department’s Exhibit 14. The Department then issues a
letter to the claimant informing him or her of the determination. See id. The claimant may appeal
an unfavorable determination by notifying the Department of a desire to appeal within 15 days of
the date the letter was issued. See id. An appeal of the determination is heard before an
administrative law judge. At the appeal hearing, the claimant is provided an opportunity to make
argument and present evidence.
E. The Department’s investigation of Debtor.
The Department received four reports identifying Debtor’s claims as possibly fraudulent.
Three of the reports were generated from third-party tips and one was generated by the
Department’s cross matching procedure. The Department received the tips in November and
December 2011. The Department is uncertain when the cross matching procedure generated a
report. Debtor’s first stint of employment following his first claim for unemployment insurance
benefits began in the third quarter of 2010. Thus, the earliest that the cross matching procedure
could have uncovered a match was toward the end of 2010. The Department began its
investigation into Debtor’s claims in November 2011. The Court infers that the Department’s
cross matching procedure uncovered Debtor’s employment with Robert Half International, Inc. in
the third quarter of 2010.5 The Court further infers that Debtor’s claim was placed in the que for
5 The Court makes this inference because: (1) Debtor was employed and earned wages in the third quarter of 2010;
(2) Robert Half International, Inc. was obligated to submit payroll tax records for the third quarter of 2010 in late
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 10 of 17

- 11 -
investigation near the end of 2010.6 Through its investigation, the Department determined that it
had overpaid Debtor $17,285.00 in unemployment insurance benefits. See Department’s Exhibits
14-A, 14-B, 14-C, and 14-D. The Department sent four letters to Debtor informing him of its
determination and of his right to appeal. See id. Debtor unsuccessfully appealed the Department’s
determination. The Department received $1,760.07 from Debtor through tax intercepts.
III. Discussion.
The Department asserts that (1) Debtor owes the Department $15,584.937 based on
overpayments of unemployment insurance benefits; and (2) that the debt is non-dischargeable
under Section 523(a)(2)(A) because it was obtained by fraud. Debtor asserts that (1) he was misled
by the Department’s staff into believing he was eligible for unemployment insurance benefits
despite his employment; and (2) the Department’s reliance on his certifications was not justifiable.
Dischargeability actions require a two-part analysis: first, the bankruptcy court must
determine the validity of the debt under applicable law, and second, the bankruptcy court must
determine the dischargeability of that debt under § 523.8 See In re McKendry, 40 F.3d 331, 336
(10th Cir. 1994) (“‘In bankruptcy court there are two separate and distinct causes of action: One
cause of action is on the debt and the other cause of action is on the dischargeability of that debt,
a cause of action that arises solely by virtue of the Bankruptcy Code and its discharge provisions.’”
(quoting In re Moran, 152 B.R. 493, 495 (Bankr. S.D. Ohio 1993)); In re Thompson, No. AP 14-
October or early November 2010; (3) Plaintiff’s cross matching procedure could have uncovered the match any time
after Robert Half International, Inc. submitted its payroll tax records for the third quarter of 2010; (4) the then
prevailing wait period between report generation and investigation was approximately a year; and (5) Plaintiff initiated
its investigation approximately a year after the payroll tax records for the third quarter of 2010 were due.
6 See infra, note 3.
7 The Department alleges an overpayment of $17,285.00
8 The Court uses “claim” as synonymous with “cause of action” for purposes of applying § 523(a)(2)(A), consistent
with the synonymous nature of those terms under the doctrines of res judicata and claim preclusion..” Compare
Restatement (First) of Judgments, § 62 (using the term “cause of action”) with Restatement (Second) of Judgments, §
25 (using the term “claim”).
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 11 of 17

- 12 -
01081, 2016 WL 4413906, at *4 (B.A.P. 10th Cir. Aug. 19, 2016) (“Dischargeability actions
require a two-part analysis: first, the bankruptcy court must determine the validity of the debt under
applicable law (the claim on the debt); and second, the bankruptcy court must determine the
dischargeability of that debt under § 523 (the dischargeability claim).”). See also Brown v. Felsen,
442 U.S. 127, 135 (1979) (differentiating between the claim on the debt and the claim on
dischargeability of the debt in holding that claim preclusion effect of a state court judgment does
not extend to the claim on dischargeability of a debt.).
A. Debtor owes a debt of $15,584.93 to the Department.
The dischargeability analysis begins with determining the validity of the debt. “Debt” is
defined in the Code as “liability on a claim,” § 101(12), and “claim” is defined in turn as a “right
to payment.” § 101(5)(A). For purposes of § 523(a)(2)(A), “debt” means liability on “an
enforceable obligation.” Cohen v. de la Cruz, 523 U.S. 213, 213 118 S. Ct. 1212, 1214 (1998)
(reaching this conclusion after examining the definition of “debt” under §§ 101(5)(A) and
101(12)). Whether a debt exists is determined by looking to applicable law, frequently state law.
To establish the claim on the debt under § 523(a)(2)(A), the claimant must establish that the debtor
is liable on an enforceable obligation under applicable non-bankruptcy law, nothing more nor less.
The New Mexico Unemployment Compensation Act requires individuals to forfeit their
entire benefit claim if they knowingly increase the amount of their benefits through a false
representation. See N.M.S.A.1978 § 51–1–38(F). That section provides:
Notwithstanding any other provision of the Unemployment Compensation Law, if
any individual claiming benefits or waiting period credits, in connection with such
claim, makes any false statement or representation, in writing or otherwise,
knowing it to be false or knowingly fails to disclose any material fact in order to
obtain or increase the amount of a benefit payment, such claim shall not constitute
a valid claim for benefits in any amount or for waiting period credits but shall be
void and of no effect for all purposes. The entire amount of the benefits obtained
by means of such claim shall be, in addition to any other penalties provided herein,
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 12 of 17

- 13 -
subject to recoupment by deduction from the claimant's future benefits or they may
be recovered as provided for the collection of past due contributions in Subsection
B of Section 51–1–36 NMSA 1978.9
Thus, the Department must establish: (1) Debtor is an individual; (2) Debtor claimed benefits or
waiting period credits; (3) Debtor made a false statement or representation or failed to disclose a
material fact; (4) Debtor did so knowingly; and (5) Debtor did so to obtain or increase the amount
of a benefit payment. See id. With respect to the scienter requirement, “[a]n act is done
‘knowingly’ if done voluntarily and intentionally, and not because of mistake or accident or other
innocent reason.” United States v. Fabiano, 169 F.3d 1299, 1303 (10th Cir. 1999).
The facts found by the Court establish each of the elements of the Department’s claim on
the debt. Debtor is an individual. Debtor claimed benefits eighty-four times in 2010 and 2011.
Sixty-five times during that period Debtor falsely represented to the Department that he earned
$0.00 in wages during the preceding week. Debtor was aware of his obligation to report his
earnings to the Department. Despite this knowledge, Debtor voluntarily and intentionally falsely
represented that he earned nothing in the preceding week. The Court infers that Debtor made the
sixty-five false representations to induce the Department into providing him benefits he was not
entitled to receive. Sixty-five times the Department did so. Under the New Mexico
Unemployment Compensation Act, the Department may recover the “entire amount of benefits
obtained” in those sixty-five weeks. The Department paid Debtor $17,285.00 in benefits in
reliance on those sixty-five false representations. The Department obtained $1,760.07 from
Defendant through tax intercepts. Debtor owes the Department a debt of $15,584.93.
B. Debtor’s $15,584.93 debt to the Department is nondischargeable under §
523(a)(2)(A).
9 N.M.S.A. § 51–1–36(B) provides for collection via “civil action in the dame of the division.”
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 13 of 17

- 14 -
Section 523(a)(2)(A) provides that a debtor is not discharged from any debt for money,
property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by
“false pretenses, a false representation, or actual fraud other than a statement respecting the
debtor’s or an insider’s financial condition.” To sustain a claim for false representation under §
523(a)(2)(A), the claimant must prove by a preponderance of the evidence that: “[(1) t]he debtor
made a false representation; [(2)] the debtor made the representation with the intent to deceive the
creditor; [(3)] the creditor relied on the representation; [(4)] the creditor’s reliance was [justifiable];
and [(5)] the debtor’s representation caused the creditor to sustain a loss.” Fowler Bros v. Young
(In re Young), 91 F.3d 1367, 1373 (10th Cir.1996). Accord In re Sturgeon, 496 B.R. 215, 223
(B.A.P. 10th Cir. 2013). Intent to deceive can be inferred from the totality of the circumstances.
Copper v. Lemke (In re Lemke), 423 B.R. 917, 922 (10th Cir. BAP 2010) (citing Young, 91 F.3d
at 1375).
Sixty-five times Debtor falsely represented to the Department that he had not earned wages
in the preceding week. The Court infers that Debtor intended to deceive the Department. The
Department relied on each of Debtor’s sixty-five false representations in paying Debtor benefits
he was ineligible to receive. The Department sustained a loss in making those payments.
Determining whether the Department’s reliance on Debtor’s sixty-five false
representations was “justifiable” requires a more nuanced inquiry. “The appropriate standard is
not ‘reasonableness’ in the sense of whether an objectively reasonable person would have relied
upon the debtor's false representations. Rather, the inquiry is whether the actual creditor's reliance
was ‘justifiable’ from a subjective standpoint.” In re Riebesell, 586 F.3d 782, 791 (10th Cir. 2009).
“Even under the ‘justifiable’ test, however, the plaintiff must ‘use his senses’ and at least make ‘a
cursory examination or investigation’ of the facts of the transaction before entering into it.” Field,
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 14 of 17

- 15 -
516 U.S. at 76, 116 S. Ct. at 446, 133 L. Ed. 2d 351. In other words, a creditor’s reliance is not
justifiable where the creditor “blindly relies” on a misrepresentation that would have been apparent
if the creditor had only performed a perfunctory inquiry. As part of the subjective analysis, the
court must consider the particularities of the creditor, including its level of sophistication,
intelligence, and experience. See In re Salma, No. 09-30863 TEC, 2010 WL 4724252, at *3
(Bankr. N.D. Cal. Nov. 15, 2010) (“Justifiable reliance is a subjective test that turns on the qualities
and characteristics of the particular plaintiff, including the plaintiff's level of sophistication and
intelligence, and the circumstances of the particular case.”).10 In In re Edgewater Place, Inc., the
court described a “key difference” between an objective reasonable standard and the subjective
justifiable standard as follows: “under the justifiable reliance standard, close attention must be paid
to the individual plaintiff's sophistication, experience and competence.” In re Edgewater Place,
Inc., No. ED CV 98-281 RT, 1999 WL 35136576, at *5 (C.D. Cal. May 18, 1999).
Here, the plaintiff is not an individual but a governmental body. The Department is
sophisticated and has significant experience uncovering and examining fraudulent claims.
However, these are not the only particularities of the Department relevant to the analysis. The
Department was overburdened and not adequately staffed at the time Debtor made his false
representations. Those particular circumstances delayed the Department’s investigation of Debtor.
The delay allowed Debtor to receive much more in benefits than he would have received if the
Department had been capable of promptly ferreting out his fraud. The Department did not “blindly
rely” on Debtor’s false representations. It was, however, incapable of performing more than a
perfunctory inquiry at the time it first became aware of the possibility that Debtor was claiming
10 In re Momoh, No. 14-00291, 2016 WL 270155, at *4 (Bankr. D.D.C. Jan. 20, 2016), reconsideration denied sub
nom. Momoh, No. 14-00291, 2016 WL 1417930 (Bankr. D.D.C. Apr. 8, 2016) (“Plaintiff's lack of sophistication is
important in determining whether reliance was reliable.”)
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 15 of 17

- 16 -
benefits he was not entitled to receive. The Department cannot react to suspicion of fraud like an
ordinary creditor. As a governmental body, the Department is obligated to follow a specific
investigation procedure and must provide a claimant with due process before it cuts off benefits to
a claimant. See New Mexico Dep't of Workforce Sols. v. Garduno, 363 P.3d 1176, 1181 (N.M.
Sup. Ct. 2016) (“Because New Mexico's unemployment compensation scheme provides for the
payment of unemployment compensation benefits, claimants for such benefits possess a property
interest protected by due process.” (internal citations omitted)); N.M. Admin. Code § 11.4.5.1 et
seq. (Administrative regulations governing the investigation and enforcement of potentially
fraudulent claims). The Department followed that procedure in this case with the promptness of
which it was capable at that time. The Court does not suggest that unjustifiable delay by a
governmental body is not possible. The Court merely finds and holds that, applying a subjective
analysis, the Department’s delay was justifiable and so was its reliance on Debtor’s false
representations.
For these reasons, the Department has met its burden in showing that Debtor’s $15,584.93
debt to the Department is exempted from the discharge under § 523(a)(2)(A).
IV. Conclusion.
Based on the foregoing, the Court will enter a judgment excepting Debtor’s $15,584.93
debt to the Department from discharge under 11 U.S.C. § 523(a)(2)(A).
_______________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: September 14, 2016
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 16 of 17

- 17 -
Copy to:
David Beebe
5500 Copper Ave. NE Apt. E-34
Albuquerque, NM 87108
Richard Lawrence Branch
New Mexico Dept of Workforce Solutions
P.O. Box 1928 Legal Section
Albuquerque, NM 87103
Case 15-01054-j Doc 25 Filed 09/14/16 Entered 09/14/16 11:10:32 Page 17 of 17