$8-Million Theft Undetectable, Official Says : Fraud: Alleged bilking of precious metals firm by a Mission Viejo socialite over four years is called ‘a sign of the times.’

Officials at the precious metals firm from which an Orange County socialite allegedly stole nearly $8 million over four years said Monday that the company had no way to detect the sophisticated scheme, calling it “a sign of the times.”

“We live in the era of computer fraud,” sighed Michael D. Magidson, executive vice president of Gerald Metals, the Stamford, Conn.-based parent company of PGP Industries, a Santa Fe Springs firm that was the victim of the scam. “It’s not something that anybody enjoys. Maybe it’s the times we live in.”

“It’s a lot of money, don’t get me wrong, (but) as a percentage, it’s not dramatic,” said Magidson, whose company does $8 billion in business each year. Still, he added, “I don’t think anybody--I don’t care if you’re General Motors--nobody should be willing to not miss $7.9 million. It’s a substantial amount of money.”

Mission Viejo resident Daniel Hernandez, a customer sales representative at PGP Industries in Santa Fe Springs, and his wife, Susie, were arrested Friday on charges of fraud, conspiracy, money laundering and illegal wire transfers after an investigation by the Internal Revenue Service.

Based in Santa Fe Springs, with plants in Tennessee and Connecticut, PGP Industries is a $75-million-a-year subsidiary of Gerald Metals. There are 150 employees at the headquarters in Southern California, where Hernandez worked from 1981 until December, when he was fired because of the alleged theft.

Gerald Metals, the parent company and one of the world’s largest metals traders, has more than 800 employees. It has branches in Alabama, California, Connecticut, New York and Tennessee. Gerald Metals was incorporated in 1962 and PGP opened in 1970.

At PGP’s Santa Fe Springs plant, a brown-and-white industrial complex that sprawls over a full city block and has four large smelting towers protruding from its center, the main activity is refining precious metals such as platinum and silver. Once the metals have been refined, PGP either returns them to the customer or buys them at market value.

Hernandez’s supervisors and the president of PGP refused to comment Monday.

According to court documents, Hernandez, who never earned more than $57,000 a year at PGP, bilked the company of $7.85 million over four years through fictitious bookkeeping and wire transfers.

Hernandez created fake transfers of precious metals from one customer’s account to another, then issued checks from PGP to buy that metal, depositing the checks in bank accounts controlled by himself or his wife, according to the documents.

To make the accounts balance, Hernandez entered transactions on the company’s books twice, sending money from the second, dummy transaction to his own accounts.

IRS investigators believe Susie and Danny Hernandez spent the money on a fleet of luxury cars, extravagant clothes and jewelry, extensive travel abroad, property, and a string of donations to charities including the Newport Harbor Art Museum, the Performing Arts Center and Opera Pacific in Costa Mesa, and the American Heart Assn.

Magidson said internal security measures have been enhanced but refused to say whether any employees besides Hernandez have been disciplined or fired.

“It is our view that this fraud was perpetrated by this individual alone,” Magidson said. “It’s the age of computer, I think that’s the bottom line.”

Daniel Hernandez remained in a Los Angeles jail Monday. Susie Hernandez was released on her own recognizance Friday. The U.S. attorney’s office expects to ask for indictments against the couple by March 5.

Times staff writers Gregory Crouch and Jon D. Markman contributed to this story.