Hialeah mayor hit with ethics charges related to Ponzi schemer

Hialeah Mayor Carlos Hernandez
Hialeah Mayor Carlos Hernandez EL Nuevo Herald

A Miami-Dade County ethics commission on Wednesday charged Hialeah Mayor Carlos Hernandez with lying — first in Spanish, then in English — at a news conference about his high-interest loans totaling $180,000 to a convicted Ponzi schemer.

In a statement issued in both languages, Hernandez responded on Wednesday afternoon by mocking the Commission on Ethics and Public Trust as a “Roman circus” that “misuses” taxpayers’ money.

Three members of the commission unanimously charged Hernandez with violating the Citizens’ Bill of Rights when he “knowingly furnished false information on a public matter” at an Oct. 13, 2011, press conference during his mayoral campaign.

“This is the first time we have used the Truth in Government provision of the Citizens’ Bill of Rights” in an enforcement action, the commission’s executive director, Joseph Centorino, said after the vote to file two violations of the ordinance, one for Spanish, the other for English.

Hernandez, the two-term Hialeah mayor and former police officer, faces up to a total of $1,500 in potential fines for the two civil charges. If the charges are not settled, the case will be heard at a mini-trial before the ethics commission still to be scheduled.

Hernandez was not present at Wednesday’s hearing, attended by his lawyer, but he issued a statement in Spanish condemning the ethics commission. The commission was established by voters in 1996 after a rash of corruption in the county. 

“The ethics commission is a political organization,” Hernandez said in his statement. “They are not prosecutors and the commission is not a law enforcement agency. The decision made today does not surprise me, since I have publicly confronted this commission to raise awareness and bring light to the political interests that dominate the organization.

“The actions of the ethics commission resemble a Roman circus,” the mayor added. “They need to create controversy where none exists to justify their own existence and the misuse of $1.9 million of taxpayers' money used for their paychecks.”

In 2012, county voters gave the ethics commission additional power to enforce the Citizens’ Bill of Rights ordinance and impose penalties, raising the significance of the Hernandez case.

Hernandez got caught in the alleged lie about his series of exorbitant loans to jeweler Luis Felipe Perez last year, when he testified about his 36-percent-interest terms at the tax-evasion trial of former Hialeah Mayor Julio Robaina and his wife, Raiza. The couple, who were acquitted at trial, had also made secret loans to Perez, in what has been described as Hialeah’s “shadow-banking” business.

At the trial, Hernandez testified as a witness for prosecutors that he received more than $100,000 in interest on his loans to Perez, contradicting his defiant statements at the 2011 news conference that he only received principal payments from the convicted schemer.

Hernandez, serving as interim mayor then, told a reporter during the English-language portion of the press conference that “my agreement was principal.” He also denounced the Miami Herald for publishing a prior story showing he had received only interest payments from Perez, which he never disclosed.

“When placed under oath, [Hernandez] told a different story than the one he told reporters at the Oct. 13, 2011, press conference and at various campaign events that season,” according to a probable cause memo written by an ethics commission lawyer.

The memo highlighted that Hernandez had “knowingly furnished false information on a public matter” at the news conference and “knowingly omit[ted] significant facts when giving requested information to members of the public.” His statements were broadcast on local TV news stations and on YouTube in Spanish and English.

The memo noted that Hernandez received a total of $126,000 in interest payments from Perez — but no payments on the original loan principal.

Hernandez never listed his loans to Perez on his financial disclosure forms for the years in question, 2007 through 2009, as required by law. But he was not charged with those possible ethics violations because the statute of limitations had expired. During those years, he served as a city councilman in Hialeah.

At the closed-door hearing on Wednesday before the ethics commission, Hernandez’s lawyer, Thomas Cobitz, submitted an affidavit from the mayor in which he “reiterated” that he declared his loan to Perez as an “investment” during the press conference in 2011.

“I have never denied the fact that I made an investment with Mr. Perez and that my return on the diamond wholesale investment was 3% per month,” Hernandez said in his affidavit. “In the 2011 press conference I reiterated that ‘this was an investment,’ and that I never made a profit and that any monies I did recover were my original investment and not interest.”

Then, the mayor portrayed himself as a victim of Perez’s $40 million financial scam, which collapsed in 2009.

“I was not the only individual who Luis Felipe Perez swindled and conned,” Hernandez said in the affidavit. “There are many in this community who are also Mr. Perez’s victims.”

Perez, who was sentenced to 10 years in prison, saw his term cut in half after cooperating with authorities in their tax-evasion case against the Robainas, as well as against some co-conspirators involved in his investment scam. Perez was released from prison in December.

Before Perez’s release, Hernandez held interviews in November with selected Spanish-language reporters in an apparent attempt to distract attention from his ethics complaint. Rather than address the complaint head-on, the mayor issued a press release attacking the commission, its probe and the lead investigator, questioning “the veracity of this claim” against him.

While Hernandez ultimately lost money in the shadow-banking scheme, he would not have known that when he entered into the loan agreement with Perez and began receiving interest payments. Under federal law, interest income must be reported to the IRS even if a financial deal later goes awry.

Hernandez's tax returns were attached to the real-estate and financial-interest disclosure forms he filed with the city of Hialeah. 

His 2009 tax return, from before his tenure as mayor, listed his profession as “councilman and investor.” He also served as a Hialeah police officer before entering politics.

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