Former Metals Dealer Admits He Skimmed Millions

Orange County socialite Daniel Hernandez pleaded guilty Thursday to one count of money laundering and one of mail fraud and agreed to pay the government $7.8 million he stole from a precious-metals firm to finance his lavish, philanthropic lifestyle.

Under the plea agreement, which was sealed but read in part by U.S. District Court Judge Alicemari H. Stotler, Hernandez will help federal prosecutors with an ongoing investigation of PGP Industries, the precious-metals firm at the center of the case.

In exchange, prosecutors said they will ask that the 40-year-old Mission Viejo man receive a reduced sentence and will drop eight other charges of mail fraud, money laundering and bank fraud.

Hernandez has alleged that the Santa Fe Springs company knew that its employees doctored bookkeeping, falsified metal samples and skimmed precious metals from customer accounts. He also has claimed that the company encouraged the practices. At least three other former company employees have buttressed Hernandez’s claims.

Hernandez has contended that his former employer also profited from the money-skimming operation, estimating that as much as $250 million was improperly diverted over the last two decades.

PGP officials have denied any wrongdoing.

Hernandez, his attorney and prosecutors declined to discuss the plea agreement Thursday, but both emphasized to Stotler that it was contingent upon the government’s promise to ask for a reduced prison sentence in return for “substantial assistance” from Hernandez.

Hernandez could receive a maximum of 25 years in prison. Sentencing is scheduled for Oct. 4.

The arrests in February of Hernandez and his wife, Susie, shocked many in Orange County social circles.

A federal case against Susie Hernandez on similar charges is still pending.

Despite his agreement to pay the money to the government, it is unclear how Hernandez will come up with the funds. While the government can confiscate any of the couple’s assets purchased with the stolen funds, much of the money already has been spent, said Assistant U.S. Atty. Stephen Wolfe.

The government is allowed to collect money Hernandez stole while at PGP because of its investigation of the firm, authorities said.

In an interview last month, Hernandez admitted to methodically stealing from PGP during his 12 years with the company, but said he acted on the firm’s behalf. He was fired last year when the allegations first surfaced.

Hernandez said he purposely shortchanged customers of metals worth $8 million to $12 million a year and claimed that in some instances customers were aware of the skimming and paid him not to steal from them.

Hernandez said he channeled the money to bank accounts in California and Texas that were controlled by his wife. He insisted that the $7,856,327.47 the government traced back to the couple’s personal accounts were “commissions” he had earned.