O.C. Socialites Linked to Missing $8 Million : Charges: Daniel, Susie Hernandez are accused of mail fraud, conspiracy. Their lavish lifestyle was legendary.

An Orange County society couple known for their lavish lifestyle and arts patronage were charged Friday with mail fraud, conspiracy, money laundering and illegal wire transfers in connection with nearly $8 million missing from a Santa Fe Springs precious metals firm.

Federal authorities allege that Daniel Hernandez, a sales representative for PGP Industries, which refines precious metals, made phony bookkeeping notations and transferred company money into bank accounts controlled by his wife, Susie Hernandez.

The Mission Viejo couple surrendered to authorities Friday on federal charges and were ordered to post bond of $100,000 each in U.S. District Court in Los Angeles.

After appearing before a federal magistrate, Susie Hernandez, 41, was released on a promise to post bond next week. Daniel Hernandez, 40, was ordered held in federal prison until he can post bond.

Assistant U.S. Atty. Stephen Wolfe said he would bring the Hernandez case to a federal grand jury within 10 days to seek an indictment against the couple. An attorney for the Hernandezes declined comment Friday.

Authorities said they believe that the couple used the missing money over the last four years to pay for luxury cars, expensive jewelry, costly homes and investment property as well as international travel.

The couple’s lavish lifestyle was legendary and chronicled frequently in Orange County’s society pages. Twice, Daniel Hernandez hid diamond bracelets inside the glove compartments of his wife’s birthday gifts--a Ferrari Mondial convertible one year and a Rolls-Royce another year.

Friends and fellow Orange County socialites said they were told that the Hernandezes earned their riches through precious-metals trading and never questioned whether the couple had the money to back up their twice-yearly trips abroad, their fleet of automobiles, their jewels and their generous charitable contributions, which included $50,000 toward a fund-raiser for the Newport Harbor Art Museum two years ago.

“The mystery to us is where they came from because they suddenly burst forth on the social scene and the philanthropic scene--we didn’t know their background or anything,” said Maxine Gavier, spokeswoman for the Newport Harbor Art Museum, where Susie Hernandez is a board member.

IRS agents who began to investigate Daniel Hernandez about a year ago said the couple’s many expensive possessions weren’t supported by their reported income. They had declared bankruptcy in 1985 and filed income tax returns stating they made $410,509 over a six-year period ending in 1990. However, they illegally amassed $7 million since 1987, IRS agents alleged.

“This investigation has not located any legitimate source of income for Daniel and Susie Hernandez which is responsible for any significant amount of this $7 million,” IRS Special Agent Garry L. Newbrough wrote in a search warrant affidavit.

According to a criminal complaint filed in federal court, the Hernandezes owned or leased 15 luxury cars, including five Mercedes-Benzes, three Rolls-Royces, three Ferraris, a Jaguar, an Aston Martin, a Porsche and a Jeep. The cars cost a total of $1.65 million.

They also paid $3,582 monthly on the mortgage on their $635,000 Mission Viejo home and bought a lot in Laguna Niguel for $660,000, IRS agents alleged.

Susie Hernandez charged more than $400,000 in jewelry to her Neiman Marcus card between 1989 and 1992, and the couple traveled to France, Italy, Mexico and Switzerland during that period, according to the affidavit. The document was filed this week in support of a search warrant to inspect the couple’s home, two bank accounts, a safe deposit box and a storage space in Costa Mesa.

A partial list of items seized Friday include a Ferrari Testarossa, a mink coat, jewelry and an undisclosed amount of cash, IRS spokeswoman Judith Golden said.

IRS officials investigating Hernandez approached PGP officials late last year, according to court documents.

A company executive told investigators that an internal audit found that Hernandez had made 109 transactions between March, 1989, and December, 1992, and he was believed to have siphoned $7.86 million from the company, the affidavit said.

Hernandez, who began working for the PGP in 1981, was placed on leave last December after the company discovered the money missing. He was later fired, according to the affidavit. Company officials in Santa Fe Springs and Stamford, Conn., declined comment Friday.

The company reclaims precious metals such as platinum and silver out of industrial wastes and then buys and sells the material. Hernandez’s job, company officials told IRS agents, was to keep track of the metals for each account the company held.

Michael Magidson, a company executive vice president, told IRS agents that an anonymous source contacted him late last year and reported that Hernandez was allegedly stealing from PGP, setting up fake transactions and allegedly routing the money to bank accounts for his own use, court documents said.

Hernandez allegedly transferred precious metals between legitimate company clients, arranged for PGP to buy the transferred metals, then had PGP issue a check or make a wire transfer to a client’s account. However, the client never got PGP’s money. Instead, it was sent to the Hernandez-controlled accounts, Magidson and federal authorities asserted.

Through manipulation of the books, the IRS said, it appeared that no money was lost on the transactions.

IRS agents said they traced the money from PGP into bank accounts controlled by Susie Hernandez. All of the money was eventually spent from those accounts or traced to two other accounts, both of which were controlled by the Hernandezes, according to the IRS.

In 1985, the couple filed for Chapter 7 bankruptcy, listing assets of $188,440 and liabilities of $251,764, the affidavit said. Since 1985, Daniel Hernandez has made $315,538. The couple made $410,509 during that time, income tax returns show, but they filed no joint return in 1991.

The couple bought a five-bedroom, 4 1/2-bath, three-car garage home in 1988 for $635,000, with a mortgage of $500,000. Between June, 1991, and October, 1992, the couple paid $416,343 in interior design costs on the two-story pink stucco home with a terra cotta tile roof, the affidavit alleges. In 1990, Daniel Hernandez bought a Laguna Niguel lot for $661,500.

Last October, an associate of Daniel Hernandez called IRS agent Newbrough and told him that Hernandez thought that he was under investigation and wanted to speak with the person heading the probe. Before the pair spoke, Newbrough said, Hernandez had entered escrow for the purchase of a $1.2-million Laguna Hills home.

After they spoke, the escrow instructions were changed so that title to the house would not be taken in Hernandez’s name but that the property would be held in a trust controlled by Hernandez, according to court documents.

Hernandez met with the IRS agent last October, and since then, Newbrough stated in court documents, the couple have put their Mission Viejo home on the market for $900,000 and entered escrow on the sale of a vacant lot for $460,000.

Federal agents have also alleged that the couple bought a 1990 Mercedes coupe through a loan that was obtained after submitting a false 1988 income tax return showing that he earned $750,000. Daniel and Susie Hernandez also allegedly received loans to purchase the 1990 Rolls-Royce Silver Spur and the 1990 red Ferrari Testarossa by using a false 1988 W-2 form, authorities said.