ItÂs almost dÃ©jÃ -vu in Hialeah politics: The cityÂs mayor has encountered critical questions on the campaign trail about his financial dealings with a convicted Ponzi schemer.
Months ago, then-Hialeah Mayor Julio Robaina faced similar treatment from the media over his loans of $750,000 to the imprisoned jeweler, Luis ÂFelipitoÂ Perez.
Carlos Hernandez took over RobainaÂs job as mayor in May and is running to keep the seat in November.
But his newfound political status has prompted questions about his $180,000 in loans to Perez, who maintains from behind bars that he paid Hernandez in interest-only payments, at an annual rate of 36 percent.
Hernandez is not under federal investigation Â unlike his predecessor Robaina, who is suspected of taking secret cash payments from Perez and not reporting them. Robaina denies any wrongdoing.
For his part, Hernandez failed to disclose the interest he earned on his loans to Perez on his federal tax returns for 2007-09.
Under federal law, income from interest payment on loans must be reported to the Internal Revenue Service and it also may be subject to taxes.
Nor did Hernandez list his loans or the interest income on his financial forms filed with the county and Hialeah.
ÂThis is a guy who stole from me,Â Hernandez, a former Hialeah police officer, told The Miami Herald Wednesday. ÂThe [loan] principal was not recovered. He owes me my principal.Â
Hernandez repeatedly refused to answer questions from Herald reporters about his apparent failure to report as much as $100,000 in interest payments from Perez.
Hernandez grew so upset over the questions that he called a press conference for Thursday, when he said he plans to denounce the Âmalicious intentions of The Miami Herald.Â
ÂI will not allow my integrity to be questioned by The Miami Herald as they attempt to once again do, as they did to former Hialeah Mayor Julio Robaina,Â Hernandez said in a release.
Hernandez served as a Hialeah police officer for 22 years, rising to the rank of commander. He made his foray into city politics in 2005 and became city council president in 2007.
That same year, he also stepped into HialeahÂs Âshadow-bankingÂ industry. He gained access through Rolando Blanco, considered the godfather of deal-making among the cityÂs politicians and business leaders.
Hernandez made two loans Â first $80,000, and later $100,000 Â to Perez, who promised investors high rates of return from his jewelry business and pawn shops. Unbeknownst to Hernandez, Robaina and dozens of others, Perez was a con artist, his business a $45 million sham.
ÂI was introduced to him through Rolando and other friends of mine at the time in Hialeah including Julio [Robaina],Â Perez said in an email interview from federal prison in South Carolina.
Hernandez Âbecame my investor after inquiring about what I did and how he could put some money in my business to make a better return. He already knew that Julio had invested with me.Â
Perez said he and Hernandez formalized the deals with a promissory note, guaranteed by PerezÂ life insurance policy. Under the terms Perez would make interest-only payments via check, but he said Hernandez could collect on the entire loan principal with 60 daysÂ notice. Hernandez never did.
ÂHe was more interested in receiving the interest payments,Â Perez wrote.
Initially, Perez paid Hernandez directly from his personal bank account Âbecause Carlos did not want to come up on my company booksÂ
. He just wanted to keep it as a personal loan so he would avoid the scrutiny of my CPA and the notion that he was collecting such a high return.Â
But when Hernandez made the second loan, Perez said he had to draw money from his company, Lucky Star Diamond, rather than from his own bank account.
Month after month, Perez paid Hernandez sums of $2,400 and $3,000 in checks, according to copies obtained by The Herald and verified by the one-time jeweler. HernandezÂ total take in interest: at least $100,000.
But none of that interest is shown on HernandezÂ tax returns, which were filed along with his disclosure forms.
On returns for 2007-09, Hernandez listed his occupation as councilman and investor and his wifeÂs job as a teacher. Here is what they reported:
•Â In 2009, they earned nearly $128,000 in gross income. More than a third came from HernandezÂ police pension. He showed interest income of only $178.
•Â In 2008, the couple indicated they earned nearly $140,000. Of that, just $401was interest income.
•Â In 2007, they reported nearly $248,000 in income. A small part Â $1,864 Â came from interest income.
Earlier this year, Hernandez declined to discuss his loan deals with Perez or a financial transaction with Recaredo Gutierrez, a real estate investor.
When Gutierrez filed for bankruptcy, he owed Hernandez $50,000.
ÂThatÂs my personal business. I knew Perez and the Blancos, like everyone else did,Â Hernandez said in April. ÂThose are private investments that I did and I do.Â
In a September debate, Hernandez fielded questions about Perez. A moderator at Spanish-language AmÃ©rica TeVe asked him about $25,200 in check payments from Perez. At the time, Hernandez said he was a victim and accused his mayoral opponent, Raul Martinez, of supplying the TV station with copies of the checks.
On Wednesday, after a campaign stop in Hialeah, Hernandez refused to explain the lack of detail on tax returns about his interest income from the Perez loans.
ÂI was taken advantage of in a scheme and he owes me money, as simple as that,Â he said. Miami Herald staff writer Christina Veiga and El Nuevo Herald staff writer Enrique Flor contributed to this report.