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MIAMI-DADE COUNTY COMMISSION ON ETHICS & PUBLIC TRUST

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PROBABLE CAUSE MEMORANDUM
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TO:

Commission on Ethics and Public Trust

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FROM:
Miriam Soler Ramos, Deputy General Counsel
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Re:
Complaint C14-036 (In re: Carlos Hernandez)
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DATE:
October 1, 2014
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Recommendation:
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A finding of Probable Cause should be entered in the above captioned matter. Probable

Cause exists where there are reasonably trustworthy facts and circumstances for the Commission
on Ethics and Public Trust (COE) to conclude that Respondent should be charged with violating
Section (A)(2) of the Citizens Bill of Rights (CBR), Part I, Miami-Dade County Home Rule
Charter, entitled Truth in Government.
Jurisdiction:
COE has jurisdiction pursuant to Section (A)(17) of the CBR which states, the
County shall, by ordinance, establish an independent Commission on Ethics and Public Trust
comprised of five members, not appointed by the County Commission, with the authority to
review, interpret, render advisory opinions and enforce the county and municipal code of ethics

ordinances, conflict of interest ordinances, lobbyist registration and reporting ordinances, ethical
campaign practices ordinances, when enacted, and the citizens bill of rights. Section
2-1072(b), states violations of the Citizens Bill of Rights are subject to the penalties set out in
Section 2-11.1(cc)(1) of the Miami-Dade County Conflict of Interest and Code of Ethics
Ordinance.
Background:
Between 2005 and 2011, Respondent was an elected official1 in the City of Hialeah (the
City).
On March 1, 2007, Respondent loaned $100,000 to convicted Ponzi schemer Luis Felipe
Perez (Perez), as part of an underground shadow-banking system that existed in the City of
Hialeah at the time. Unlike other individuals who loaned Perez money, including former Hialeah
Mayor Julio Robaina and his wife, Raiza, Respondent did not receive a formal collateral
agreement, contract or promissory note from Perez.
The Robainas were eventually charged with one count of conspiring to defraud the
United States and two counts of making false statements to federal agents.2 The conspiracy
charge alleged that the couple conducted financial transactions in a manner that concealed their
true nature, concealed information from their tax preparer, signed false tax returns that
understated their true income (including interest paid by Perez before his Ponzi scheme
collapse), and in Julio Robainas case, filed corporate tax returns that also overstated losses.3
1

From 2005 through May 2011 Respondent was a Councilman for the City. In May 2011 Respondent was
appointed interim Mayor; he was subsequently elected Mayor of the City in a special run-off election on November
15, 2011.
2

United States District Court, Southern District of Florida, Case No. 13-20346-Cr-UNGARO.

The Robainas were acquitted after a 6-week jury trial.

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C14-036

According to Perez and consistent with the evidence as presented by the United States
Attorneys Office (USAO) in U.S. v. Julio Robaina et al (the Robaina trial), under the terms of
the verbal loan agreement, Perez was to pay Respondent three (3) percent interest per month or
$3,000 on that loan, 36-percent interest annually which amount constitutes an illegal usurious
rate. 4
On April 4, 2007, Perez paid Respondent the first $3,000 monthly interest payment, using
check number 1013. Thereafter, Perez continued to pay the same amount monthly until May
2009.
In July 2007, Respondent loaned Perez an additional $80,000. On July 23, 2007, Perez
deposited check number 2407 from Respondent in the amount of $60,000 written to Lucky Star
Diamond[s]. In the memo line of check 2407, Respondent wrote, loan/investment [emphasis
added]. On the same date, Perez deposited the remaining $20,000 in the form of a Total Bank
cashiers check from Respondent made out to Lucky Star Diamond[s]. According to Perez and
again consistent with the evidence presented in the Robaina case, the terms of this verbal loan
agreement were similar to the first: Perez was to pay Respondent three (3) percent interest per
month, or $2,400, amounting again to the illegal interest amount of 36 percent annually.
On August 23, 2007, Perez began giving Respondent the equivalent of two (2) checks
monthly: one for $3,000 and another for $2,400. This practice continued until May 2009.5
Exhibits introduced in the Robaina trial show Respondent received a total of $126,000 in interest
payments between April 2007 and May 2009. In December 2010, Perez was sentenced to 10
4

It is a second degree misdemeanor for lenders to charge more than 25 percent annual interest. The statute of
limitations for violation of usury laws is 1 year. See F.S. 687.01(2).
5

In January 2008, Perez missed a $2,400 payment on the $80,000 loan

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C14-036

years in prison for securities fraud and a concurrent five year sentence for bank fraud, and was
ordered to pay $10 million in restitution. He has cooperated with government prosecutors and
continues to do so, in the hopes of reducing his sentence.
Respondent was appointed interim Mayor of the City in May 2011 after then-Mayor
Robaina resigned to run for Mayor of Miami-Dade County. During the fall of 2011, Respondent
was campaigning to retain the position of Mayor.
As an elected official, Respondent was required to file a Statement of Financial Interest
(Form 1) disclosing the sources of his primary and secondary income. Respondent filed Form 1s
for 2007, 2008 and 2009. Respondent was required to disclose the payments he received from
Perez in his 2007, 2008 and 2009 Form 1s since they were sources of income. In his Form 1 for
2007, Respondent was required to disclose the $39,000 he received in interest payments from
Perez; he did not do so. In his Form 1 for 2008, he was required to disclose the $62,400 he
received in interest payments from Perez; he did not do so. In his Form 1 for 2009, Respondent
was required to disclose the $24,600 he received in interest payments from Perez; he did not do
so.
On October 12, 2011, the Miami Herald published an article accusing Respondent of
lending funds to Perez at usurious rates and of not disclosing the interest earned on the loans as
income in his financial disclosure forms.
The next day Respondent, who was the interim Mayor at the time and running for
election, called a press conference to address the allegations made in the article. Footage from
the press conference aired on multiple television stations in Spanish and English. The press
conference was also disseminated on YouTube in both Spanish and English.
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C14-036

During the Spanish-language press conference, Respondent stated, I invested money


with Mr. Luis Felipe Perez and never recovered my original investments; therefore there were
never earnings to declare in my income tax. Later, Respondent stated that a $2,500 check he
deposited was part of recovering my original investment.
During the English-language press conference, Respondent stated, I invested money
with Luis Felipe Perez and never recovered my original investments. So I never had profits to
report on my tax statements. Later, in response to a question he stated, my agreement was
principal. Alwaysa few timesthat I made investments in movies or anything like this, Id
get my principal back
COE investigators showed the YouTube videos to three reporters who attended the press
conference all three authenticated them as complete, accurate and unaltered. The COE
subsequently obtained via subpoena a complete copy of the unedited Spanish version of the press
conference directly from WJAN-Channel 41.
On November 15, 2011, Respondent was elected Mayor of the City of Hialeah to
complete the two (2) years remaining on Robainas term. On November 5, 2013, Respondent
was re-elected Mayor.
On April 14, 2014, Respondent was called to testify in the Robaina trial as a prosecution
witness. Respondent, who testified without an immunity agreement, was essentially called to
help the prosecution bolster testimony it had already received from convicted Ponzi-schemer
Perez, who painted a picture of the underground shadow-banking industry that thrived in
Hialeah.

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C14-036

When placed under oath, Respondent told a different story than the one he told reporters
at the October 13th, 2011 press conference and at various campaign events that season.
Responding to questions from federal prosecutor Richard Gregorie (Gregorie), Respondent
admitted loaning Perez $180,000 with the expectation of 3 percent monthly interest payments, or
36 percent annual returns, which would violate state usury statutes. Respondent also testified
that he received more than $100,000 in interest payments from Perez, but none of the principal
when the Perez Ponzi scheme collapsed in 2009. Respondents testimony from the Robaina trial
states as follows:
Q: So he paid you over $100,000 in interest up till that point?
A: Somewhere in that investment, somewhere in that area, sir, yes, sir.
Q: But you hadnt taken anything off the principal. You hadnt taken anything off the
principal? He still owed you $180,000?
A: I believe so. Yes, sir. Im sorry.6
Respondents sworn testimony directly contradicts the statements that he made to the
public at the October 13, 2011 press conference.
After testifying in federal court, it is clear that Respondent received $126,000 in interest
income.
Relevant Ordinances
Section (A)(2) of the Charter, entitled Truth in Government, states, in pertinent part:
No County or municipal official or employee shall knowingly furnish false
information on any public matter, nor knowingly omit significant facts when
giving requested information to members of the public.
6 Transcript

of Respondents federal court testimony in USA v. Robaina et al., P. 12, Lines 18-25.

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Section 2-1072(b) of the Miami-Dade County Code, states, in pertinent part:


Violations of the Citizens Bill of Rights are subject to the penalties set out in
Section 2-11.1(cc)(1) of the Miami-Dade Conflict of Interest and Code of Ethics
Ordinance.

COUNT ONE

On or about October 13, 2011, Respondent violated Section (A)(2) of the Charter when
he stated, during a Spanish-language press conference and to Spanish-speaking media, that he
had never received interest payments from Perez on the money he loaned him, when, in fact, he
received up to $5,400 per month in interest payments from Perez from March 2007 through May
20097. Respondent knowingly furnished false information on a public matter, when he filed
his Form 1 in 2007, 2008 and 2009, and failed to acknowledge the interest income he received
from Perez during those years. Respondent further knowingly furnished false information on a
public matter, when he made false statement at the October 2011 press conference.
Furthermore, during the press conference, Respondent knowingly omit[ed] significant facts
when giving requested information to members of the public, who viewed the taped press
conference.
COUNT TWO
On or about October 13, 2011, Respondent violated Section (A)(2) of the Charter when
he stated, during an English-language press conference and to English-speaking media, that he
had never received interest payments from Perez on the money he loaned him, when, in fact, he
received up to $5,400 per month in interest payments from Perez from March 2007 through May
2009. Respondent knowingly furnished false information on a public matter, when he filed his
7

Respondent received $3,000 per month from March 2007 through July 2007.

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C14-036

Form 1 in 2007, 2008 and 2009, and failed to acknowledge the interest income he received from
Perez during those years. Respondent further knowingly furnished false information on a
public matter, when he made false statement at the October 2011 press conference.
Furthermore, during the press conference, Respondent knowingly omit[ed] significant facts
when giving requested information to members of the public, who viewed the taped press
conference.
Conclusion:

A finding of Probable Cause should be entered as to Counts One and Two as there is

substantial evidence to prove that Respondent violated 2-11.1(A)(2) of the Charter.

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