Lawyer questioned ‘unusual’ home loan in former Centinela Valley superintendent’s contract

Feb. 02--Dennis Hernandez acknowledges that when the interim superintendent of the Centinela Valley Union High School District asked him to look over a draft of his permanent contract nearly a decade ago, he didn't give it a close inspection.

But even on a quick read, something "unusual" caught his eye.

Jose Fernandez, promoted to replace ousted Superintendent Cheryl White, had included a section allowing him to obtain a low-interest home loan from the cash-strapped district.

As an education attorney, Hernandez had never seen such a perk working on the contracts of administrators, but he also had never written one for a superintendent.

"There's a wide range of terms people ask for, it just seemed out of the ordinary," Hernandez testified Friday at Fernandez's preliminary hearing on public corruption charges. "This district has been going through economic hard times and was even at one time close to being taken over by the state."

But, he said, Fernandez assured him the home loan was standard and based on a sample contract from a leading association of school administrators.

Months later, in December 2009, the school board of the Lawndale-based district approved a final version of the contract including the home loan option, which Fernandez used in 2012 to buy a $1.6 million Ladera Heights house that prosecutors now say was acquired through "ill-gotten gains."

Hernandez was one of two attorneys who took the witness stand Friday, the fifth day of the preliminary hearing for Fernandez, who is accused of duping school board members into giving him lucrative pay and benefits.

Investigators allege Fernandez misled the school board to believe Hernandez negotiated the contract, which, with other perks, enabled the superintendent to take home $750,000 in compensation in 2013.

Fernandez, 59, could be sentenced to 15 years in prison if he is convicted of a dozen felony counts, including embezzlement, grand theft, misappropriation of public funds and conflict of interest. He was arrested in August 2017, more than three years after he was fired amid controversy.

A grand jury was convened in the case in May 2016, though a prosecutor clarified Friday that the purpose was to investigate, not to seek an indictment.

A judge will decide at the end of the preliminary hearing whether Fernandez will stand trial.

Hearing moving slowly

With 7,000 pages of documents and as many as 30 witnesses, the proceeding in downtown Los Angeles is taking longer than expected and may have to resume in March after Tuesday.

Hernandez was one of five attorneys who represented the school district to take the witness stand this week.

Through their questioning, Deputy District Attorneys Stefan Mrakich and Terrie Tengelsen painted a picture of a system in which a plethora of attorneys worked separately on bits and pieces of the legal agreements at the center of the case, enabling Fernandez's alleged crimes to slip right past them.

Like three other attorneys -- Samuel Santana, Candace Bandoian and Sue Ann Evans -- Hernandez has been granted immunity for his testimony.

Attorney was personal friend

The day also featured testimony from Jack Ballas, another attorney and longtime personal friend of Fernandez from their days at Inglewood City Hall in the 1990s, when Fernandez was a councilman and Ballas was assistant city attorney.

Fernandez contracted Ballas part-time to give Centinela Valley legal advice and, in particular, figure out why the district's legal bills were sky high.

Prosecutors questioned whether, at times, Ballas offered legal advice in the interest of Fernandez more so than the school district -- something he denied.

In one instance, Ballas said he advised Fernandez on how to revise wording in the home loan agreement to avoid his personal financial troubles affecting his ability to borrow. The school board was unaware he had gone through a bankruptcy.

Superior Court Judge Stephen Marcus asked Ballas if he had an ethical obligation to disclose it to the school board.

He replied that it was his impression that Fernandez would let the other attorneys working on his home loan know, and that they would inform the school board.

Life insurance policy buried in bylaws

In another instance, Tenglesen read aloud an email exchange between Hernandez and Fernandez's secretary going over language buried in 3,000 school board bylaw updates that gave him a $750,000 whole-life insurance policy.

Prosecutors allege Fernandez overwhelmed the school board with the changes to hide the life insurance policy and other perks he enriched himself with. After he was fired, he cashed out the life insurance policy for $90,000 without the district's knowledge, investigators said.

Ballas testified that Fernandez had assured him the policy was standard and based on recommendations from the Association of California School Administrators. But Tenglesen showed him a set of recommendations from the time that had no mention of life insurance policies.

Value of policy bumped up $250,000

Fernandez had originally set the value at $500,000 in a draft, Ballas said, but later increased it without explanation.

Fernandez's defense attorney, Vicki Podberesky, pointed out that the provision also gave assistant superintendents whole-life life insurance policies. And she noted that the school board members had requested workshops going over all of the updated bylaws.

When Ballas showed up to the first workshop in August 2012, he said only three school board members made it, and they quickly seemed uninterested.

Within 20 minutes, all three left and the meeting ended.

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