From $650,000 O.C. House to Welfare Line : Finances: Despite assets including a $7,700 watch, Susie Hernandez applies for AFDC, authorities say.

When times were better and the money was flowing, Susie Hernandez had a $400,000 jewelry collection, a fleet of luxury cars at her disposal, a 12-room house in Mission Viejo and the expectation that she could travel with her husband, Danny, wherever she pleased.

But in recent weeks, with her husband in prison, Susie Hernandez has appeared so desperate for money that the former socialite has sold the shrubbery and palm trees from her yard, stripped the house of its light fixtures and built-in appliances, and even made off with the garbage disposal.

Two weeks ago, she was sentenced to 16 months in federal prison for income tax evasion, while her husband got 71 months for his role in a scheme to divert nearly $9 million from the precious metals company where he worked.

And after sentencing, authorities say, Susie Hernandez applied for welfare in an effort to support her children while she and her husband serve their prison terms. She is due to report to prison May 23 but has asked for a delay so she can attend her son’s kindergarten graduation.

Last week, a district attorney’s investigator with the welfare fraud unit came across Susie Hernandez’s application for Aid to Families With Dependent Children, a program that provides money for the care of needy children whose parents are absent, disabled, dead or unemployed. The Hernandezes have a daughter, Amanda, 7, and a son, Nick, 5.

The investigator, Pam Reighard, contacted the U.S. attorney’s office in Santa Ana and asked for information about Susie Hernandez’s income. Assistant U.S. Atty. Stephen Wolfe sent over a four-page list of the family’s assets as of September.

Reighard said she could neither confirm nor deny whether Susie Hernandez had applied for benefits. However, Wolfe said Reighard told him last week that she had remembered the Hernandez name from newspaper accounts and confirmed that Susie had applied for welfare benefits on behalf of her children. Susie Hernandez could not be reached for comment.

It is unlikely that the Hernandezes would qualify for aid. A family with more than $1,000 in assets, such as bank accounts, stocks or real estate, is ineligible for benefits. Clothing and furniture do not count toward income, but jewelry--other than family heirlooms and wedding rings--do.

“One Piaget watch of Susie’s is worth $7,000 alone,” Wolfe said. “I doubt she’d qualify for welfare.”

The list of assets included the Piaget watch ($7,700 on sale when it was purchased 10 years ago), a Chanel watch given as a Christmas gift and a Turkish coin bracelet from Susie Hernandez’s parents.

The assets also included Danny Hernandez’s 31 Giorgio Armani ties, 20 new Armani shirts, eight new Armani suits and seven new Armani sports jackets.

Almost none of the property, including the furniture, was confiscated, because federal agents didn’t think it was worth the effort to try and sell it.

Those who are upset with the Hernandezes’ behavior and years of free spending say it is outrageous that they would apply for welfare after squandering a fortune on country club memberships and Rolls-Royces. But those who sympathize with the family say it appears they are so broke that they have no other choice.

Joan Politeo Freeman, Susie Hernandez’s deputy public defender, said she had not heard directly from her client about her welfare application, but that such an action would not surprise her, nor would it be it inappropriate.

“The family’s fairly destitute, and Susie is trying to arrange for the guardianship of her children,” Freeman said. “If she’s trying for benefits, then they’d be for the children. The proper view of all this may be that she’s making arrangements for the care and feeding of her children because there’s no other income.”

Freeman said Susie Hernandez is still trying to decide who will take care of her children while she’s in prison.

Wolfe, who prosecuted the case against the Hernandezes, said Susie Hernandez’s behavior never ceases to amaze him.

“This is part and parcel of the way she has behaved since her arrest,” he said. “She has shown no remorse. Her personality is more manipulative than honest by nature.”

Susie Hernandez has made another enemy in Pacific National Bank, which foreclosed on the family’s $650,000 Mission Viejo home in February and evicted her in April.

A bank executive visited the home the day after she moved out and found that refrigerators, cabinets, entertainment centers and a microwave oven--all of which the bank owned--had been removed. The official also found that outside plants were dug up and taken, and all the drapes had disappeared. The garbage disposal also was gone.

The bank filed a police report on April 9, and damages to the house are estimated at $13,500. The bank had given Susie Hernandez $2,000 to leave the house in good order.

Janet Petry, vice president and general counsel for Pacific National Bank, said Susie Hernandez’s personal attorney has argued that the house was left in good order. The $2,000, she was informed, would not be returned.