AUGUSTA, Maine — Two conservative Maine policy groups released video footage Thursday that purportedly showed a state employee encouraging an individual seeking Medicaid to hide his income.

The exchange is proof, the groups claim, that the state’s welfare system is susceptible to abuse.

Others, including Maine Gov. Paul LePage, quickly pointed out that the video shows no actual fraud and, in fact, highlights the system’s checks and balances because the man ultimately was denied benefits.

Billing it as “explosive evidence to potential fraud and abuse,” the Maine Heritage Policy Center and Americans for Prosperity-Maine held a joint press conference in Augusta to unveil the secretly recorded interaction.

On one side was a Department of Health and Human Services employee in Biddeford. On the other was an actor who identified himself as Ted Ceanneidigh — a play on the name of late U.S. Sen. Ted Kennedy, D-Mass. — who was applying for taxpayer-funded health care.

According to the video, the individual revealed to the DHHS worker that he had more than enough money to buy private health insurance but could not provide pay stubs because all of his income was in cash and precious metals. He also indicated to the employee that his trade was “pharmaceutical imports,” and showed the worker a business card that featured a marijuana leaf.

The DHHS employee, who identifies herself in the video only as “Diane,” responded by saying: “They’re going to ask if you have income. You don’t have to go into details. You don’t have a paycheck, you don’t file taxes, you have no income.”

The two conservative policy groups said the exchange, recorded in February, highlights a flawed system just waiting to be exploited.

“How many Ted Ceanneidighs out there were advised by DHHS workers to hide their income?” Americans for Prosperity-Maine Director Carol Weston said Thursday. “How many were never reported for suspected drug dealing? How many Ted Ceanneidighs are receiving taxpayer-funded health care today because of unethical practices within Maine’s welfare bureaucracy?”

Sara Gagne-Holmes, executive director of Maine Equal Justice Partners, said the two-minute highlight video released by the two Maine policy groups is inflammatory, but the full 45-minute exchange shows no actual fraud.

“It was a screening interview; there was no application. This person never received Medicaid or any other benefits,” she said. “There are checks and balances in the system that came in at the end of the video.”

If anything, Gagne-Holmes said, the exchange shows that the front-line DHHS worker probably could benefit from additional training.

Nevertheless, before Thursday’s press conference, Weston and Lance Dutson, director of the Maine Heritage Policy Center, met with DHHS Commissioner Mary Mayhew and staff from Gov. Paul LePage’s office to discuss possible reforms in light of the video.

LePage talked with reporters shortly after Thursday’s press conference. First, he said he wanted to thank the individual who recorded the video but said he wished he had received it back in February because “we’d be six months further along in fixing the problem.”

The governor went on to say that the video showed poor customer service and poor time management on the part of the DHHS staffer.

“Although I do not believe the video shows an employee willfully allowing abuse of the welfare system, I do believe it is an example of how poor training can open the door to fraud and abuse,” LePage said. “We must protect the limited resources for those who are truly in need and shutdown the benefits for those abusing the system.”

In the full version of the video, the worker, and later her supervisor, do repeatedly question the individual about the sources of his income and at one point the supervisor accuses him of being evasive in his answers.

Mayhew declined to discuss whether the DHHS worker shown in the video could face disciplinary action, but LePage said he authorized her to conduct an internal investigation.

The video was produced by Project Veritas, a national group that has conducted a series of undercover investigations into Medicaid fraud across the country. The case in Maine is just one of many instances of fraud found across the country, according to Project Veritas founder James O’Keefe.

“Government workers willing to aid people with criminal backgrounds and great wealth should be an outrage to every American,” O’Keefe said in a press release. “The integrity of the entire Medicaid system has been called into question.”

O’Keefe refers to himself as a citizen journalist but has generated criticism for his ethically questionable tactics.

The Maine Heritage Policy Center, however, stood by the video and said it should motivate action from all branches of government.

“Our system is clearly vulnerable to fraud and abuse, and we can no longer pretend these things only happen in other states,” Dutson said.

Ben Grant, chairman of the Maine Democratic Party, called the footage a “‘gotcha’ video that doesn’t have any ‘gotcha’ in it.”

“My question is where are the adults in the Republican Party right now,” Grant said. “We have [Maine Republican Party Chairman] Charlie Webster and the Maine Heritage Policy Center manufacturing fraud to push their own ideological agendas.”

In recent months, particularly since Republicans have become the majority party in the House and Senate, there has been increased scrutiny of welfare. The Maine Heritage Policy Center has been particularly vocal about welfare fraud and abuse in Maine and last year released a lengthy report outlining problems within the system.

Dutson said his group has offered a number of policy initiatives he hopes the state will implement, including establishing a Secret Shopper-type program to monitor the performance and practices of DHHS employees.

LePage, even before he was elected, was a strong proponent of welfare reform and has vowed to make it a priority of his administration.

H e recently created the Fraud and Abuse Prevention Team to intensify its efforts to deter abuse. The nine-member group, made up of members of the Department of Health and Human Services and the Office of the Attorney General, has two charges: to identify fraud before it happens and to make sure all cases of potentially illegal activity are properly investigated.

Despite claims made by the Maine Heritage Policy Center and others, state officials have said Maine’s rate of welfare fraud is extremely low. In many cases, it actually costs more money to uncover fraud than any amount that could be recovered.

Some said the latest salvo by the Maine Heritage Policy Center is just another sensational anecdote designed to incite and distract the public.

“Let’s stop the nonsense,” Grant said. “There are people in this state who want to solve the real problems facing Mainers. Let’s stop the lies and misleading information and start talking about the real facts.”