O.C. Couple Charged With Fraud

Federal officials formally charged Daniel and Susie Hernandez, an Orange County society couple, with money laundering, wire fraud and bank fraud Friday, and pledged to investigate claims that the precious-metals firm where he worked systematically stole millions of dollars from its clients.

Meanwhile, more former employees of PGP Industries Friday backed Daniel Hernandez’s assertions that the company knew it was cheating customers by allowing employees to doctor books, falsify samples and skim the precious metals. They called on authorities to examine the company’s records.

Paul Thomson, the company’s controller for the past six years, told The Times Thursday that top PGP officials knew of skimming from customer accounts and even included the proceeds when it projected annual income forecasts. Thomson said he has spoken with U.S. Treasury officials about his accusations.

Company officials continued to deny the allegations Friday, saying that Hernandez, who was arrested with his wife last month in connection with the disappearance of nearly $8 million, stole without their knowledge. They focused their anger on Hernandez, not on the others making the claims.

“It’s very malicious and libelous what he’s saying,” William Quindlen, president of PGP, said of Hernandez’s claims. “This is an unworthy individual. He’s stolen from the company. What would you expect him to say?”

More charges are expected to be filed Monday, Assistant U.S. Atty. Stephen Wolfe said. Wolfe said that he was aware of the accusations against company officials and that he intended to investigate.

“The allegations are very serious,” Wolfe said. “The government never hears or reads about allegations like these without making inquiries. Danny Hernandez has made a lot of accusations, and the government doesn’t know whether any of them will prove to be true, but we will endeavor to find out.”

The government has accused Hernandez of setting up dummy accounts on the company’s books and filtering checks through bank accounts that his wife controlled. Wolfe alleges that the couple used the money to purchase real estate, luxury cars, and expensive clothes and jewels and to donate heavily to local charities.

In his first interview since his arrest, Daniel Hernandez this week admitted stealing millions of dollars from customers but said he did it on PGP’s behalf.

Hernandez worked for the company for 12 years, until he was fired last year. Hernandez said he purposely shorted companies of metals worth about $8 million to $12 million a year and said that in some instances, customers were aware of the skimming and paid him not to steal from them.

Hernandez insisted in the interview that the $8 million the government has traced to his bank accounts over the past three years was money he deserved, a “commission” he earned for his work, and he did not apologize for using it to buy a five-bedroom house in Mission Viejo, 15 luxury cars and hundreds of thousands of dollars in expensive clothing and jewelry.

Three other employees have concurred with portions of Hernandez’s claims about PGP in separate interviews with The Times.

Charles Jones, a 16-year plant supervisor for PGP who quit last month after moving from Southern California, said he watched as employees routinely cheated customers out of the proper amount of metals due them. He has not spoken with authorities yet, he said.

Another former employee, who demanded anonymity, said the company did not have proper safeguards in place to keep employees from stealing. The man, a customer sales worker at PGP for a decade before leaving the company for a higher-paying job, corroborated Hernandez’s claims in an interview with The Times. He said he has spoken with the Internal Revenue Service about the matter.

“There were a lot of holes in the system; the holes were in the system so the company could get away with stealing themselves,” he said. “Everybody talked about it freely,” he said of the stealing. “You play or you get out.”

Hernandez said his employer, a subsidiary of the Connecticut-based Gerald Metals, kept two sets of books to hide the alleged theft, which he said he discovered on his first day of work in 1981. Hernandez and the other former employees say PGP lied to customers about how much precious metal was in the samples they processed and kept the excess for itself.

Hernandez estimated that about $250 million in all may have been taken from customers. Thomson agrees that the amount may be that high.

“I was not directly involved in it,” Thomson said, “but I saw the results. I saw the reports.”

Thomson, who resigned in January after nearly six years on the job, alleged that PGP’s computer system was designed with skimming in mind.

Quindlen said no customers had contacted the company to complain or to withdraw their business. Upon the Hernandezes’ arrest last month, PGP sent a letter to all clients assuring them that the alleged crimes were isolated instances.

“No customer is or was at risk . . . the Hernandez scheme has had no impact on our company’s financial strength, stability or operations,” Quindlen wrote in the Feb. 22 letter. “Any losses arising out of the scheme are insured . . . . The scheme involved embezzlement from PGP. There was nothing in the government charges or in our own extensive and continuing investigation to indicate that any other employees were involved in this scheme.”

David H. Fell, who owns a precious-metals firm in the City of Commerce, on Friday dismissed Hernandez’s accusations and said he would continue to bring his business to PGP.

“I’m not concerned at all,” Fell said Friday. “I would tend to believe they’re straight. I have no reason to think they’re not.”