Dermis Hernandez was a decorated Navy veteran who served in Iraq and a longtime police officer who worked the streets and waterways of Miami.
But in January, Hernandez was portrayed as a moonlighting “Ponzi schemer” by his own police department and federal agents after he was arrested on charges of fleecing hundreds of thousands of dollars from investors. Among them: fellow Miami cops who sank their savings into his Costa Rican business venture, which promised high returns from loans for real estate investments.
It was all a sham to enrich Hernandez — initially accused of deceiving new investors to pay off old ones as his loan business unraveled, federal authorities said.
On Friday, however, Hernandez was sentenced to only five years’ probation by U.S. District Judge Kathleen Williams, who ordered him to pay back $400,000 to about a dozen investors in his Costa Rican venture. Prosecutors, still accusing Hernandez of operating a racket, wanted the judge to put the 42-year-old away for nine months.
The judge’s apparent rationale was that the now-fired officer did not plead guilty to fraud. In August, Hernandez pleaded guilty to lying to the Small Business Administration to obtain $50,000 in loans for falsely inflating roof repair costs on his Homestead home from Hurricane Irma — money that he used to pay off investors. His conviction carried up to five years in prison, though the sentencing guidelines were between six months and one year.
Williams mostly took Hernandez to task for being a lousy businessman.
“It is inconceivable to me, Mr. Hernandez, that you thought you had any talent or capacity to engage in this kind of business,” the judge said. “You are not an astute businessman — you are a cop, and apparently a good cop.”
Before his sentencing, Hernandez apologized to the judge, his wife and investors, but he insisted he was never a Ponzi schemer, as the U.S. Attorney’s Office and FBI depicted him.
“They can accuse me of many things, but I never lied to them [my investors] and I never committed a Ponzi scheme,” he told the judge as he wiped away tears. “By taking responsibility [to try to pay them back with the SBA loan], I made a serious error — an error that has great repercussions for my family and my future. ... That’s why I pleaded guilty, because of that error I made.”
Hernandez’s defense attorneys, Gregory Gonzalez and Silvia Pinera-Vazquez, strongly disagreed with the prosecution’s claim that their client’s crime amounted to investment fraud. They argued for a probationary sentence.
“This past year for Mr. Hernandez has altered his entire life,” Pinera-Vazquez told the judge. “He finds himself on the other side of the law. ... [But] there was no fraud in Costa Rica. This is a civil matter. Money was lost.”
Assistant U.S. Attorney Sean Cronin painted a starkly different portrait of Hernandez, however.
“It’s not this past year that has altered his life,” Cronin said. “It’s his series of criminal choices that have altered his life. He and his father-in-law [in Costa Rica] were running a Ponzi scheme. They needed to help keep the Ponzi scheme going by bringing in new investors.”
In January, Hernandez was arrested after FBI agents learned he was suddenly flying to Costa Rica because of an “emergency.” Fearing he might never return — his wife is a Costa Rican national — agents cuffed the cop while he was boarding a flight at Fort Lauderdale-Hollywood International Airport.
Miami Police Chief Jorge Colina fired Hernandez, a 14-year veteran of the force, after his arrest, calling his misconduct “disgraceful.”
Miami internal affairs and the FBI said Hernandez operated the alleged Ponzi scheme between 2011 and 2015 through a company called DD&M Investments.
According to a criminal complaint, he offered “low-risk” investments in his company, which he claimed was giving high-interest loans to property owners in Costa Rica. The loan recipients used their properties in the Central American country as collateral, he said.
But that wasn’t true, according to agents. Targeting active and retired cops, Hernandez and “co-conspirators” showed phony paperwork indicating the company had property rights to land in Costa Rica.
“In truth, Hernandez and his co-conspirators used the investor funds for personal enrichment and to pay the returns of other investors,” according to the FBI criminal complaint.
At least one victim paid out $10,000 from his police retirement fund — with Hernandez instructing him how to withdraw the money. The victim believed he would be getting a 20 percent return on the investment per year.
Another victim told agents he was promised a whopping 24 percent return on the investment. That led him to invest $125,000, while only ever receiving $17,000 back in interest payments.
Miami Herald staff writer David Ovalle contributed to this story.