Prosecutors probe whether Centinela Valley school board knew of $910,000 home loan to ousted Superintendent Jose Fernandez
Opening their public corruption case Monday against former Centinela Valley school Superintendent Jose Fernandez, prosecutors honed in on the $910,000 home loan he secured from the district and whether the school board was aware of it.
On the first day of Fernandez’s preliminary hearing in Los Angeles Superior Court, an attorney for the school district consumed the entire day on the witness stand as the prosecution launched into the specifics that made Fernandez among the highest paid superintendents in the state in 2013.
While approximately 30 witnesses are expected to take the stand this week, only Samuel Santana — an attorney with the firm Dannis Woliver Kelley, which represents the school district — testified on Monday.
Santana was assigned to prepare documents for Fernandez’s loan, a provision included in his original employment contract in July 2009, though it wasn’t enacted until more than three years later and during the final months of his second personal bankruptcy.
Low-interest loan
The $910,000 loan, with only 2 percent interest over 40 years, allowed Fernandez to use district funds to purchase a $1.6 million, two-story home in Ladera Heights, on which he is still making payments to the district.
“I’d never drafted a home loan of that magnitude before,” Santana said.
At the time, experts said the loan terms were exceptional even for someone with excellent credit and unheard of for someone who had just emerged from bankruptcy.
The loan was executed in 2012, before Fernandez made a total of $663,000 in compensation the following year leading the tiny Centinela Valley Union High School District, which serves 6,600 students in Lawndale and Hawthorne. The home loan and a $750,000 life insurance policy Fernandez took out before the board could approve it were both perks he engineered beyond his 2013 compensation.
Fernandez was fired in July 2014 and arrested in August 2017 on 12 felony counts, including embezzlement by a public official, misappropriation of public funds, grand theft and conflict of interest. If convicted, he could be sentenced to up to 15 years in state prison.
Did school board approve loan?
On Monday, prosecutors questioned whether the district’s five board members were aware of the home loan deal Santana was drafting. They also questioned revisions Fernandez and his personal attorney had asked of Santana during the drafting process.
Santana said he began preparing documents in the fall of 2012. During the process, Fernandez and his attorney sent proposed revisions to Santana, which he granted because he believed the changed language would not harm the district, he testified.
Santana said he was aware of the property Fernandez had aimed to purchase, but did not know where Fernandez lived prior to the move and hadn’t inquired.
Asked by Deputy District Attorney Stefan Mrakich if he knew Fernandez was in bankruptcy at the time the documents were drafted, Santana said he was unaware.
Of the changes, Fernandez requested that a paragraph stating there were “no actions, proceedings, claims or, to borrowers’ knowledge, threats against or affecting the property or any other properties of borrower,” be changed to “threats against borrowers’ ability to pay.”
Mrakich also called into question whether the school board had any knowledge of the home loan before it was approved. Previously, prosecutors have alleged that the only record of the loan that went before board members was a copy of a check to a Santa Monica escrow company “surreptitiously” included in several pages of financial records under a consent calendar of routine items.
On Monday, Mrakich pointed to a confidential memorandum sent by Santana to then board President Rocio Pizano explaining the process by which the home loan was to be executed and stating Fernandez should take all documents to the board or the district for approval.
No response from school board president
Santana said he never received a response from Pizano on the memorandum.
Fernandez’s defense attorney, Vicki Podberosky, said two other memorandums to Pizano about the loan also went unanswered. The second of those was sent Nov. 8, 2012. Despite not receiving an answer, Santana moved forward to execute the documents on the assumption Pizano had seen the memo.
Podberosky also pointed to a Nov. 9, 2012, letter Santana sent to the Los Angeles County Office of Education, stating the home loan documents did not need further approval because the board had approved Fernandez’s employment contract in 2009, and it included reference to a home loan.
Both communications to Pizano and the Office of Education were made before Fernandez recommended changes be made to the documents. Santana said he did not resend the new drafts to either party.
But he did meet with Fernandez and Assistant Superintendent of Business Services Ron Hacker to go over the final drafts of the contract, which Podberosky explained meant that a district employee was aware of the terms of the loan.
The preliminary hearing, which is anticipated to take five days, will continue Tuesday.