People v. Superior Court (Fernandez) CA2/8 ( 2021 )

Filed 12/13/21 P. v. Superior Court (Fernandez) CA2/8
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
THE PEOPLE, B305058
Petitioner, (Los Angeles County
Super. Ct. No. YA096660)
v.
SUPERIOR COURT OF LOS
ANGELES COUNTY,
Respondent;
______________________________
JOSE A. FERNANDEZ,
Real Party in Interest.
ORIGINAL PROCEEDINGS in mandate. Superior Court
of Los Angeles County. Ronald S. Coen, Judge. Petition granted;
remanded with directions.
Jackie Lacey and George Gascon, District Attorneys, John
Niedermann, Matthew Brown, Felicia Shu and Kenneth Von
Helmolt, Deputy District Attorneys, for Petitioner.
No appearance for Respondent.
Andrues Podberesky, Vicki Podberesky and Dillon Malar
for Real Party in Interest.
**********
The superior court partially granted the motion to dismiss
of defendant and real party in interest Jose A. Fernandez,
dismissing seven of 12 felony counts of official misconduct on the
ground they were barred by the four-year statute of limitations
codified at Penal Code section 801.5.
The People timely filed a petition for writ of mandate
arguing the superior court erred in finding the counts were time-
barred. Pretrial review by writ was appropriate because the
court’s order did not resolve all counts. (People v. Superior Court
(Lujan) (1999) 73 Cal.App.4th 1123, 1125 (Lujan).)
We grant the petition and issue a writ of mandate directing
respondent superior court to vacate its order and enter a new
order denying Fernandez’s motion to dismiss.
FACTUAL AND PROCEDURAL BACKGROUND
Centinela Valley Union High School District (the district) is
a public school district in Los Angeles County. After serving as
the interim district superintendent for nearly two years, real
party in interest Jose Fernandez was hired in 2009 by the
district’s five-member board of education (the board) for a three-
year term. Shortly before his term expired in June 2012, the
board approved a four-year contract extension.
In February 2014, the Daily Breeze published an article
raising numerous questions about Fernandez’s generous
compensation, echoing criticisms raised in an earlier, December
2010 article in the same newspaper. (Kuznia, Centinela Valley
schools chief amassed $663,000 in compensation in 2013, Daily
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Breeze (Feb. 8, 2014); Kuznia, ‘Magnificent’ deal outrages
Centinela Valley teachers, Daily Breeze (Dec. 19, 2010).) The
2014 article prompted an internal investigation by the district
and an audit by the Los Angeles County Office of Education.
Fernandez was placed on administrative leave, and the matter
was turned over to the Los Angeles District Attorney’s Office.
1. The Charges
The District Attorney’s Office filed a felony complaint on
August 29, 2017, charging Fernandez with 12 counts of official
misconduct between 2009 and 2014, including embezzlement of
public funds (Pen. Code, § 504, § 514; count 1), conflicts of
interest (Gov. Code, § 1090; counts 2, 3, 4, 6, 7 & 9),
appropriation of public monies (Pen. Code, § 424, subd. (a);
counts 5, 8 & 10) and grand theft (Pen. Code, § 487, subd. (a);
counts 11 & 12).
Citing Penal Code section 803, subdivision (c), the People
alleged the “violations were not discovered and could not
reasonably have been discovered until after February 12, 2014.”
Several paragraphs detailed the reasons for the delayed
discovery. We summarize the discovery allegations.
After the February 2014 Daily Breeze article, the board
retained attorney Dennis Hernandez to review Fernandez’s
employment contract. On March 11, 2014, Mr. Hernandez made
a presentation to the board that outlined the substantial
financial benefits paid to Fernandez beyond what had been
disclosed to the board. Fernandez had misrepresented to board
members that the information previously reported by the media
relating to his compensation package was incorrect and
exaggerated. “It was not until District Attorney investigators
obtained voluminous documents and conducted interviews with
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numerous witnesses that facts giving notice of the criminality of
Fernandez’s actions were discovered by law enforcement and by a
governmental official with supervisory authority over
Fernandez.”
Fernandez often concealed information from the board that
“prevented the Board from discovering Fernandez’s crimes
against the district. For example, by overwhelming the Board
with the consideration of revisions to approximately 3,000 board
bylaws, board policies, and administrative regulations in
December of 2010, defendant Fernandez succeeded in burying
lucrative financial provisions for himself in the alleged revisions.
Fernandez also lied to the Board when he told them the revisions
were all standard updates based on model policies developed by
the California School Board Association when in fact, two new
policies contained benefit provisions that were unique [provisions
Fernandez drafted].” “Fernandez also concealed from the Board a
supplemental retirement benefit he conferred upon himself [in
two separate plans,] misrepresented the cost of the plan, and he
unilaterally manipulated the definition of the defined benefit
conferred without allowing actuarial costs for his changes to be
computed.”
“Defendant Fernandez failed to invite legal counsel to
advise the Board at the February 28, 2012, Board meeting in
which he proposed an addendum to his employment contract[,]
[failed to explain] the effect of the amendment, and concealed
[information] material to the Board making an informed
decision.”
“In December of 2012, Fernandez failed to present to the
board for ratification a mortgage agreement, promissory note,
and deed of trust for a home loan in the amount of $910,000 that
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was paid entirely by [the district]. A $910,000 check to the Santa
Monica escrow company was the only aspect of this transaction
submitted to the Board and it was done so surreptitiously.”
“Between 2011 and 2013, defendant Fernandez failed to
seek ratification for excess salary paid by [the district] to himself.
Fernandez also failed to inform the Board that payments made to
him by [the district] for additional retirement service credit in
2013 were in fact purchased in 2009 well before ratification of his
employment contract and using money from a business
previously owned by Fernandez that closed due to bankruptcy.
Fernandez concealed the extent of the ‘reimbursement’ payments
made to him by distributing the reimbursements over four
payments between January and November 2013 and without
notice to or consent from the Board.”
2. The Preliminary Hearing
The preliminary hearing began in January 2019 before
Judge Stephen Marcus. Numerous witnesses testified over the
course of 10 days.
a. The Board
The district is governed by a five-member board. Board
members are elected, serve in a part-time capacity, and receive a
few hundred dollars a month in compensation for their time. The
primary duty of the board is setting policy and overseeing the
work of the superintendent. The superintendent is considered
the CEO of the district with responsibility for maintaining the
fiscal health and welfare of the district and managing the day-to-
day operations. Fernandez’s employment contract with the
district specified he was both the CEO of the district and
secretary of the board.
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The five members of the board during the relevant time
period were Gloria Ramos, Sandra Suarez, Rocio Pizano, Maritza
Molina and Hugo Rojas.
Gloria Ramos was elected to the board in 2007 and
remained a member of the board at the time of her testimony.
She worked for the district for several decades, starting out as a
cafeteria worker. She held various positions including
attendance clerk and librarian before eventually running for the
board.
Sandra Suarez was a member of the board from 2007 to
2011. Ms. Suarez has an associate arts degree, but no financial
education or training.
Rocio Pizano was a board member from 2005 to 2018. She
has a degree in accounting and worked fulltime for American
Honda Motor Company while serving on the board.
Maritza Molina was elected to the board in November 2009,
a few months after graduating from college and just before the
board vote on Fernandez’s employment contract. She served
until 2015 when she resigned.
Hugo Rojas was elected in November 2009 and was still
serving on the board at the time of his testimony. He served as
board president in 2010, 2015 and 2018. (Members rotated
serving in that capacity.) Mr. Rojas had prior experience serving
on the board of the Hawthorne School District. Like the other
members, he has always had a separate full time position while
serving on the board.
The board held general public meetings twice a month. If
situations arose that warranted an additional meeting, a special
meeting was noticed in accordance with the Education Code and
board bylaws. Several days before each meeting, board members
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received a packet of information with the agenda and materials
summarizing the issues that would be discussed and voted on at
the meeting. Descriptions and analyses were generally short and
summary in nature. If members had any questions, they were
supposed to direct those questions to Fernandez.
Fernandez routinely held what were called “board
briefings” before general meetings. They were casual lunch
meetings that lasted no more than an hour, and attendance was
voluntary. The board briefings gave members an opportunity to
ask questions of Fernandez before voting on agenda items.
Mr. Rojas relied on those briefings in making decisions on how to
vote.
Ronald Hacker, the assistant superintendent of business
services, testified the district operated on the theory that the
board has one employee, the superintendent. All other
administrative employees and assistant superintendents reported
to the superintendent and did not have direct relationships with
the board members. Bob Cox, assistant superintendent of human
resources, also testified it was not his normal practice to speak
directly to board members.
b. Fernandez negotiates a lucrative employment
contract in 2009 by telling the board it was a
standard form used by the Association of
California School Administrators.
In December 2007, Fernandez was installed as interim
superintendent. Ms. Ramos, who was board president at the
time, testified that while serving as interim superintendent,
Fernandez asked for a longer-term contract with additional
benefits. Ms. Ramos thought some of the benefits Fernandez
wanted were not appropriate. In December 2009, a special
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meeting was scheduled to discuss and vote on Fernandez’s
employment contract.
Ms. Ramos was on maternity leave when the special
meeting was held. She received the agenda materials at home
and participated in the meeting by telephone. The board
discussed Fernandez’s contract and agreed to increase
Fernandez’s compensation but was not inclined to include several
of the benefits Fernandez had requested. The board voted
unanimously to approve the contract.
Several days later, the contract was brought to Ms. Ramos’s
home for signature, as she was still on maternity leave. The four
other board members had already signed off on it. Ms. Ramos
testified that, as she started reading through the contract before
signing, she realized it contained different terms than the
contract the board had approved. She compared it to the copy
she had received. The contract sent for her signature was
backdated to an effective date of July 2009 and included several
provisions the board had not approved, including a 9 percent
longevity bonus, 30 days of paid vacation instead of 20 days, a
home loan option, and a $1 million life insurance policy.
Ms. Ramos refused to sign the contract.
Ms. Ramos called Fernandez to confront him about the
changes. He told Ms. Ramos he had worked hard for the district
getting it out of bankruptcy, and he had not sought anything
unusual, but had relied on form contracts from the Association of
California School Administrators. He also told her he would not
exercise the home loan option. Ms. Ramos testified Fernandez
basically “talked [her] down.” Nevertheless, she told the other
board members about her discussion with Fernandez and asked
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for a special meeting to further discuss the contract. But a
majority did not agree to hold another special meeting.
Ms. Suarez testified the board discussed the contract before
voting unanimously to approve it. The discussions were held in
closed session with Fernandez present. It was not unusual for
the board to discuss personnel matters in closed session because
of confidentiality concerns. Ms. Suarez did not recall any specific
topics discussed but did recall Fernandez saying he obtained
sample contracts from the Association of California School
Administrators.
Ms. Molina testified the December 2009 meeting was her
first meeting after being sworn in as a member of the board. She
did not have much time to review the contract before the vote,
but she recalled a brief discussion in closed session with
Fernandez, with some district lawyers present. One of the
attorneys said the contract was standard for the industry, and
Fernandez agreed with that characterization. Ms. Molina
understood the lawyers represented the interests of the district
and were there to provide information and guidance to the board.
She voted to approve the contract, relying on the lawyers’
statements.
Ms. Pizano and Mr. Rojas could not recall any specifics
about the discussion of Fernandez’s employment contract.
Ms. Pizano believed there was a brief discussion of the life
insurance policy and the home loan provision. Fernandez told
the board the provisions were standard and based on a form
contract used by the Association of California School
Administrators. Like Ms. Molina, Mr. Rojas was a new member
of the board and had been sworn in shortly before the 2009
special meeting. Mr. Rojas testified the board members did the
9
best they could according to their abilities given the limited
resources and the time they had.
c. All communications with district lawyers are
funneled through Fernandez.
The district employed several outside law firms to provide
legal advice, including Dannis Woliver Kelley (DWK). Three of
the DWK attorneys who performed work for the district testified,
pursuant to immunity agreements, at the preliminary hearing,
Samuel Santana, Sue Ann Evans and Candace Bandoian. Two
other attorneys who were not affiliated with DWK also performed
work for the district and testified at the hearing, Dennis
Hernandez and Jack Ballas.
All the attorneys testified the district was their client, not
Fernandez personally. However, because Fernandez was the
head representative of the district, he was their usual contact
person. Sometimes they would speak with district management
personnel like Mr. Hacker, the assistant superintendent of
business services. But they did not ordinarily communicate
directly with board members.
The board members confirmed this was the normal
practice. Ms. Suarez testified any questions for, or information
from, the district’s lawyers came through Fernandez.
Ms. Molina never personally sought advice from district counsel
because Fernandez repeatedly said that legal questions should be
directed to him. Mr. Rojas testified that any legal issues were
supposed to be shared with Fernandez who would then determine
whether to seek advice from district counsel. Ms. Ramos testified
Fernandez made it very clear to the board that any legal
questions had to go through him.
10
Mr. Ballas, who had known Fernandez for years, testified
he was hired by the district to review its legal bills and look for
ways to reduce expenditures on legal fees. He also worked on
new protocols restricting who was authorized to contact district
lawyers for advice and requiring logs about when any such
contacts were made.
d. The 2010 Daily Breeze article reports teachers’
union criticism of Fernandez’s compensation.
On December 19, 2010, an article was published in the
Daily Breeze criticizing the compensation package in Fernandez’s
2009 contract. The article did not implicate Fernandez in
criminal misconduct. Rather, the article focused on criticism of
the board from the teachers’ union for having approved his
contract. The article also acknowledged several achievements by
Fernandez during the then-recession, including bringing the
district back from near bankruptcy, preventing widespread
teacher layoffs, raising student test scores and successfully
getting two construction bonds passed.
Ms. Molina recalled seeing the article and that the head of
the teachers’ union spoke out against Fernandez’s compensation
package at a board meeting in early 2011. Ms. Molina testified
that Fernandez and some of the district lawyers told the board
his compensation package was standard for superintendents
throughout the state.
e. Fernandez buries additional personal benefits
in reams of board bylaws and policies.
Sometime in late 2010, the board members were given
three to four large binders containing the board’s governing
bylaws and policies. Fernandez said they had not been updated
in decades and recommended they be revised and updated.
11
Ms. Ramos testified the board was told the proposed revisions
were based on model policies and templates from the California
School Board Association.
Much later, in 2014, the board learned that, buried within
the thousands of pages of revised bylaws and policies, were
provisions awarding Fernandez an additional $750,000 life
insurance policy. Also buried within the binders were provisions
to award Fernandez extra days pay, giving him immediate
additional compensation and increasing the value of his pension.
None of the board members was able to read through all
the materials in the binders, estimated to be approximately
4,000 pages. Ms. Ramos tried to read some sections with
members of the teachers’ union, but they did not get far. Three of
the board members (Ms. Suarez, Ms Molina and Ms. Pizano) told
Ms. Ramos they had not been able to read the materials, nor did
they understand large portions of them. Ms. Suarez found them
particularly confusing. Mr. Rojas called it an “outrageously”
large amount of material to digest.
Mr. Ballas, one of the district’s outside attorneys, testified
he was asked to attend a special board meeting to answer
questions about the proposed revisions to the bylaws and policies.
The meeting was short and not particularly productive because
several members either arrived late or left early for various
reasons. (One member had childcare issues, and Ms. Ramos’s
mother had recently passed away.)
Mr. Ballas told Fernandez that his background was in
municipal law and not the Education Code, and he recommended
Fernandez run the revisions by attorneys at DWK. Fernandez
said he would do that. Mr. Ballas also sent an email to Fernandez
advising that any cost implications from adopting the revisions
12
should be included in the agenda analysis for the board. As it
turned out, Fernandez ignored this advice.
Because of the large volume of materials to review,
Ms. Ramos pulled the revisions from the agenda several times to
give the board more time to consider them. She did not oppose
updating the bylaws and policies, but she objected to the way
they were being presented, in a rush, all at once. Ms. Ramos felt
“mistrust[ful]” of Fernandez. Her concern was about being
rushed into passing updates without knowing all the specific
changes and how they would impact the district. She did not
testify she suspected at the time that Fernandez was doing
something illegal. Fernandez responded to her concerns by
shifting the focus to larger issues facing the district that needed
their attention, like avoiding layoffs, low student test scores and
the like.
Mr. Rojas was never advised the proposed revisions gave
Fernandez additional benefits. He also did not recall any
discussion of any potential fiscal impact of adopting the proposed
revisions. He recalled Fernandez said the changes were “pretty
standard” for most districts. When Mr. Rojas asked if they had
been reviewed by counsel, Fernandez said everything was “good
to go.” Mr. Rojas trusted Fernandez and relied on his
representations in voting in favor of adopting the revisions.
Ms. Pizano testified the agenda analysis for the revisions
stated the cost implications were still “to be determined.” She did
not recall the board ever being given that information at a later
date. She also recalled Fernandez representing the revisions
were standard. There was never any disclosure the proposed
revisions provided additional benefits or compensation to
Fernandez. Like Mr. Rojas, Ms. Pizano trusted Fernandez’s
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representation they were standard revisions and therefore voted
to approve them.
Ms. Ramos testified Fernandez never disclosed or explained
that any of the policy revisions, if adopted, would result in
additional financial benefits to him in the form of insurance
policies or extra days pay. The board, as Fernandez’s supervisor,
was the only entity that could approve additional compensation
for Fernandez, and there should have been a specific vote on it.
Ms. Ramos did not learn the revisions resulted in additional
benefits to Fernandez until 2014.
The resolution to update the bylaws and policies passed
with three members voting yes, Ms. Suarez voting no, and
Ms. Ramos abstaining.
f. Fernandez manipulates district lawyers and
the board to conceal his conflict of interest in
supplemental retirement plans.
Two different Public Agency Retirement Services (PARS)
plans were presented to the board for a vote, one in 2010 and
another in 2012. The 2010 PARS plan, which covered only
Fernandez and assistant superintendents, was approved but was
not implemented due to questions raised by the PARS agency.
The second plan that eventually passed in 2012 covered a larger
group of eligible long-term employees.
Ms. Evans, a lawyer with DWK, testified that Fernandez
asked her to look at the 2010 plan and provide some analysis and
advice regarding the way it was structured. She advised
Fernandez he had a conflict of interest in managing the plan
while benefitting from it, and that concern had been flagged by
PARS. Ms. Evans did not advise the board about the conflict of
interest.
14
Mr. Cox, assistant superintendent of human resources,
worked with Fernandez, Ms. Bandoian of DWK and Ed O’Leary
of PARS in drafting the plans. Mr. Cox testified Fernandez put
the 2012 PARS plan on the board’s agenda. Fernandez was
eligible to participate in the plan, which he helped draft, and
Fernandez vigorously pushed for its adoption. Fernandez
proposed having an employee’s highest salary year be the basis
for payments under the plan, and based on his highest salary
year, he would be entitled to $52,000 annually if the plan was
adopted.
Fernandez spoke in favor of the plan to the board but did
not disclose he would be able to participate and benefit
financially if the plan was approved and implemented.
Fernandez also underestimated the fiscal impact of the plan in
the summary analysis presented to the board.
Ms. Ramos recalled the district considered the
supplemental PARS plans as a means of encouraging long-time
teachers to take early retirement which would be a financial
benefit for the district. She voted in favor of the 2010 plan,
believing that was its purpose. Ms. Ramos did not know
Fernandez was to become the plan administrator, or that the
plan would only cover senior management. She was also
unaware that Fernandez stood to benefit by as much as $294,000.
None of that information was presented to the board.
g. Fernandez conceals from the board changes in
law that prohibited some provisions in his 2009
contract, thereby misleading the board as to
the reasons for his 2012 contract extension.
Ms. Bandoian, a partner at DWK, testified that Fernandez
asked her to look at a draft extension of his employment contract
15
sometime after AB 1344 went into effect on January 1, 2012.
AB 1344 had a number of provisions, including prohibiting an
evergreen clause and an automatic salary increase clause in
certain employment agreements. An evergreen clause provides
for the automatic renewal of a contract at the expiration of the
term unless expressly terminated.
The DWK law firm prepared a general informational flyer
about AB 1344 to let their district clients know it potentially
impacted some employment contracts. Ms. Bandoian believed
the flyer was probably only sent to Fernandez and not individual
board members.
Fernandez’s 2009 employment contract had both an
evergreen clause and an automatic salary increase clause, so one
or both needed to be changed if Fernandez was going to continue
in his position at the end of his term in June 2012.
Ms. Bandoian prepared a memo responsive to Fernandez’s
inquiry to her that was intended to be copied to Ms. Pizano, who
was board president at the time. Fernandez asked her to delay
sending the information to Ms. Pizano until he had a chance to
review it. After looking at copies of the correspondence,
Ms. Bandoian acknowledged it appeared the memo ultimately
sent to Ms. Pizano did not contain the AB 1344 information.
The final version of Fernandez’s 2012 contract extension
deleted the evergreen clause and set a new four-year term to
expire in June 2016. Fernandez never told the board that
changes in the law prohibited the evergreen clause in his 2009
contract.
Ms. Pizano testified she did not recall any discussion about
changes in applicable law at the time Fernandez’s contract
extension was being considered.
16
Ms. Molina understood her vote was simply to extend
Fernandez’s term for four years. She was not aware of any other
relevant issues. She had no background or legal training in
employment contracts and no one provided any information to
the board about new legislation impacting the contract extension
or the meaning of “evergreen” clauses.
Mr. Rojas testified he did not recall any discussion about
any changes in law that would have impacted the contract or his
decision-making in voting on the contract. At the time, he
believed Fernandez was doing a good job and voted yes.
Ms. Ramos, who ultimately abstained from the vote to
approve, said there was no discussion about new legislation
prohibiting evergreen clauses. Fernandez simply asserted that
he thought the provision should be deleted because it was “the
right thing to do.”
h. Fernandez secretly exercises a home loan
option to buy a new house without board
approval.
Fernandez’s 2009 contract included a home loan provision
in the event it became necessary for him to relocate and acquire a
principal residence in the district. Sometime in the fall of 2012,
after the board had approved the four-year contract extension for
Fernandez, Ms. Evans, a partner at DWK, asked her colleague,
Mr. Santana, to draft loan documents for Fernandez related to
the home loan provision in his contract. After he drafted the
documents, Mr. Santana sent them to Fernandez, who returned
them with “redlined” revisions. Among other changes, Fernandez
requested the removal of the district’s authority to call the loan in
the event he was terminated for cause, instead limiting the
17
district to calling in the loan only in the event of his “voluntary
separation.”
Mr. Santana sent e-mails to Mr. Hacker and Ms. Pizano,
who was board president at the time, advising them of
Fernandez’s desire to exercise his home loan option. He included
a number of recommendations for the district, including that an
independent property appraisal was advisable. He also
forwarded copies of the draft loan documents, but he did not
forward the copies with Fernandez’s redlined revisions.
Mr. Santana did not receive any response from Ms. Pizano so he
assumed the board did not have any questions. Mr. Santana did
not make any presentations to the board about the legal or tax
ramifications of the home loan for the district.
Mr. Santana told Fernandez he should have the final home
loan documents presented to the board for review and approval.
He did not follow up with Fernandez about whether that was
done. Fernandez never presented any information about the
home loan to the board for approval.
Sometime in September or October 2012, Mr. Hacker
received an e-mail asking him to approve payment to DWK for a
title search related to a home loan for Fernandez. In early
December 2012, Fernandez called him in to his office. He told
Mr. Hacker he would be signing his loan documents as the
district representative. Fernandez did not say whether the board
had authorized this procedure. After all the documents were
signed, Mr. Hacker asked Fernandez if he wanted the transaction
to be placed on the next board agenda. Fernandez said that was
not necessary. Fernandez said he would write a letter to the
board president advising that he had exercised his option for the
loan. There is no evidence Fernandez ever wrote the letter.
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Ms. Pizano knew Fernandez lived in or near the district
and did not believe he would need to exercise the option. She
recalled having a conversation with Fernandez about his home
being burglarized. Fernandez said he was concerned for his
family’s safety and wanted to move, so he planned to exercise the
home loan option in his contract. They did not discuss the issue
further. The board never reviewed or voted on any loan
documents. Ms. Pizano may have seen the paperwork sometime
after the loan was completed or when it was pending, but not
earlier and not for purposes of voting to approve it.
Mr. Rojas was aware Fernandez’s contract had a home loan
option but did not understand how, if or when it could be
exercised. He recalled that Ms. Pizano may have said something
to the effect that the loan option was “on the table” but nothing
more specific. Mr. Rojas assumed that any loan contracts would
have to come before the board for review and approval.
Although the loan documents were not provided to the
board for review and approval, the $910,000 payment to fund
Fernandez’s loan was listed on a warrant report that went before
the board. However, Mr. Rojas testified he never saw it. He
explained that monthly warrant reports were presented to the
board on the consent calendar. Payments were not individually
scrutinized and voted on. Most warrant reports were
voluminous. The $910,000 payment was included in a report that
was 104 pages long. When reports were that lengthy, Mr. Rojas
relied on Fernandez and legal counsel to highlight important
matters for the board’s review and consideration.
Mr. Hacker testified that in April 2014 after Fernandez
was placed on leave, he reviewed various old records, including
old warrant reports, and discovered the $910,000 warrant to
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Santa Monica Escrow for Fernandez’s loan was listed in the
November 2012 report, a month before the loan documents were
signed. The warrant was paid as a direct payment from the
general fund without a purchase order being generated through
the district’s internal software. Without a purchase order, the
warrant would not specifically be brought to the attention of the
board. Mr. Hacker did not know who arranged for that to be
done, but he testified it would have required a management level
employee to authorize a direct payment being made in that
manner.
i. The 2014 Daily Breeze article exposes
Fernandez’s conflicts of interest.
In February 2014, the second Daily Breeze article came
out. Mr. Rojas asked Fernandez about the article during a board
briefing and said it was “disturbing.” Fernandez said the article
made mistakes and misrepresentations and miscounted and/or
doubled his actual benefits.
Fernandez requested that Mr. Hernandez, one of the
district lawyers, prepare a document summarizing the terms of
his contract for the board. At a closed session meeting in March
2014, Mr. Hernandez gave a presentation to the board about
Fernandez’s compensation and benefits.
Ms. Molina recalled the presentation was “pretty basic” and
not very detailed. She also recalled thinking it was “too late” to
be receiving for the first time an explanation of the various items
of Fernandez’s compensation. Ms. Molina, Mr. Rojas, and
Ms. Pizano each testified the benefits were more substantial than
had been previously disclosed. They learned for the first time at
Mr. Hernandez’s March 2014 presentation about some of the
benefits Fernandez had received.
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Ms. Ramos testified she was not “sharp enough” to have
discovered these benefits sooner. She could not recall when, but
she did confront Fernandez at some point about the $1 million
life insurance policy he was provided. He explained he had a
heart condition, and the district was one of the listed
beneficiaries, so it was a benefit for the district in the event
something happened to him. She understood from their
conversation the district would only be responsible for that
portion of the premiums related to the district’s share as one of
the designated beneficiaries. Fernandez’s wife was the
designated beneficiary for the majority of the policy. It was not
until 2014 that she learned Fernandez had actually received
three life insurance policies, the $1 million policy, plus a
$750,000 policy, and another $250,000 policy and that the district
was paying the premiums for all three policies
j. The preliminary hearing ruling
Judge Marcus found the People had adequately established
all 12 counts were timely filed. The court held Fernandez to
answer on all counts, except counts 6, 7 and 8, which the court
dismissed for lack of proof.
3. The Penal Code Section 995 Motion to Dismiss
After the preliminary hearing, the People filed an
information against Fernandez alleging all 12 felony counts and
the lengthy discovery allegations.
Fernandez filed a motion to dismiss pursuant to Penal
Code section 995. The motion was set for hearing before Judge
Ronald S. Coen. Fernandez’s main argument was that the
statute of limitations barred the charges. He contended the
board members were aware of facts long before August 29, 2013
(more than four years before the prosecution was commenced)
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and failed to reasonably and timely act on such knowledge.
Fernandez also briefly argued a failure of proof of some of the
counts.
The court denied the motion in part and granted it in part,
reasoning “I do find there is sufficient evidence to uphold the
information; however, that doesn’t end the inquiry. There is an
issue relating to the statute of limitations.” The court found the
board had not acted as a reasonably prudent person in
discovering the alleged fraud and misconduct alleged in counts 2,
3, 4, 6, 7, 8 and 9. The court dismissed those seven counts on
statute of limitations grounds only.
The People then filed this petition contending the trial
court erred in ruling on the statute of limitations defense as a
matter of law and requesting a writ of mandate directing the
court to vacate its order and enter a new order denying the
motion to dismiss.
DISCUSSION
1. Standard of Review
The petition challenges the trial court’s order partially
granting Fernandez’s motion to dismiss pursuant to Penal Code
section 995. We review the evidentiary record and findings at the
preliminary hearing at which Fernandez was held to answer.
When a trial court resolves a section 995 motion to dismiss, it is
not functioning as a factfinder but as a reviewing court. (People
v. Gonzalez (2017) 2 Cal.5th 1138, 1141.) It must draw every
legitimate inference in favor of the information, and it may not
substitute its judgment as to the credibility or weight of the
evidence for that of the judge who presided over the preliminary
hearing. (Ibid.) Likewise, an appellate court reviewing a section
995 dismissal order, by appeal or writ, reviews the determination
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of the preliminary hearing judge. (Ibid.; accord, People v. Fine
(1997) 52 Cal.App.4th 1258, 1262-1263.)
2. The Discovery Rule in the Applicable Four-year
Statute of Limitations
The parties agree the relevant statute of limitations as to
all dismissed counts is the four-year statute at Penal Code
section 801.5 which provides that “[n]otwithstanding Section 801
or any other provision of law, prosecution for any offense
described in subdivision (c) of Section 803 shall be commenced
within four years after discovery of the commission of the offense,
or within four years after the completion of the offense,
whichever is later.” The charges of official misconduct at issue
here fall within the offenses enumerated in subdivision (c) of
section 803.
The discovery rule codified in Penal Code section 801.5
incorporates a diligence requirement. “ ‘[T]he crucial
determination is whether law enforcement authorities or the
victim had actual notice of circumstances sufficient to make them
suspicious of [criminal activity] thereby leading them to make
inquiries which might have revealed the [criminal activity].’
[Citation.] The victim has the requisite actual notice when he
has knowledge of facts sufficient to make a reasonably prudent
person suspicious of criminal activity.” (People v. Lopez (1997)
52 Cal.App.4th 233, 248, (Lopez); accord, People v. Bell (1996)
45 Cal.App.4th 1030, 1061 [“[A]n offense is discovered when
either the victim or law enforcement learns of facts which, when
investigated with reasonable diligence, would make the person
aware a crime had occurred.”].)
Where, as here, the crimes involved official misconduct
with respect to government funds, the victim was the board. The
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board was responsible for overseeing the fiscal affairs of the
district and had a legal duty to report a suspected offense to law
enforcement agencies. (Lopez, supra, 52 Cal.App.4th at p. 238.)
The board was also responsible for overseeing Fernandez as
superintendent of the district. (See, e.g., Ed. Code, § 35161
[board “may delegate to an officer or employee of the district any
of those powers or duties” but “retains ultimate responsibility
over the performance of those powers or duties so delegated”].)
The board’s knowledge is the relevant focus for resolving the
statute of limitations question.
3. Analysis
At the conclusion of the preliminary hearing, Judge Marcus
found the People had met their burden to show the statute of
limitations did not bar any of the 12 counts. Based on our
independent review of the preliminary hearing evidence
summarized above, we conclude that finding was correct.
The evidentiary showing required to sustain a charge at a
preliminary hearing is not substantial. (Lujan, supra,
73 Cal.App.4th at p. 1127.) All that is required is evidence
supporting a “ ‘rational ground for assuming the possibility that
an offense has been committed and that the accused is guilty of
it.’ ” (Ibid.; accord, People v. McCann (2019) 41 Cal.App.5th 149,
154-155.) And, “ ‘[e]very legitimate inference that may be drawn
from the evidence must be drawn in favor of the information.’ ”
(Lujan, at p. 1127.) If there is some evidence supporting the
finding of the preliminary hearing judge, “ ‘the reviewing court
will not inquire into its sufficiency.’ ” (McCann, at p. 155.)
Fernandez argues the evidence conclusively established the
board members were aware of facts before August 29, 2013 that
would lead a reasonable person to suspect criminal activity, but
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they failed to timely act on that knowledge. We disagree the
statute of limitations bars counts 2, 3, 4, 6, 7, 8 and 9 as a matter
of law.
a. Counts 2 and 9
Counts 2 and 9 allege conflicts of interest in violation of
Government Code section 1090 based on Fernandez’s undisclosed
financial interest in the 2010 and 2012 PARS supplemental
plans.
After the board voted to approve the 2010 plan, it was not
implemented because of the concerns raised by PARS. The 2012
plan was approved and implemented.
The board’s votes on both retirement plans occurred before
2013, but there is no evidence that any member of the board
knew in 2010 or 2012 that Fernandez had been involved in
drafting the plans, or that he was eligible to receive significant
financial benefits under the plans. Ms. Evans of DWK advised
Fernandez he had a conflict of interest, but she did not relay that
information separately to any board member. Fernandez
encouraged the board to adopt both plans without disclosing his
involvement and financial interests, and he concealed from the
board, advice provided by DWK, including that his proposal to
become administrator of the 2010 plan created a conflict of
interest. Fernandez vigorously pushed for adoption of the 2012
plan and provided an agenda analysis to the board that
underestimated the annual fiscal impact on the district of
implementing the plan.
Ms. Ramos testified the presentations to the board about
the plans focused on them as valuable tools for enticing older,
higher salaried teachers to take early retirement as a means of
reducing long-term costs for the district. She was never aware of
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Fernandez’s involvement and eligibility to receive significant
benefits under either the 2010 or 2012 plan.
Ms. Ramos, Ms. Pizano, Ms. Molina and Mr. Rojas all
testified they were unaware of Fernandez’s conflict of interest
and self-dealing with respect to the retirement plans until after
the 2014 Daily Breeze article. No member of the board had
actual knowledge of Fernandez’s conflicts of interest before the
article was published. The evidence recited at length above does
not compel the inference as a matter of law that one or more
board members had knowledge of facts sufficient to make a
reasonably prudent person suspicious, prior to August 2013, that
Fernandez engaged in criminal activity in connection with the
retirement plans.
b. Counts 3 and 4
Counts 3 and 4 allege conflicts of interest in violation of
Government Code section 1090 based on Fernandez’s role in
advocating for the revision of the board bylaws and policies,
hidden within which were highly lucrative extra-contractual
benefits to him.
Like the PARS plans, the board’s vote on the bylaw
revisions occurred before August 2013. But the testimony of all
board members demonstrated they were overwhelmed by the
4,000 pages of material and unaware that buried within those
materials were provisions, drafted in part by Fernandez, that
gave him substantial additional financial benefits, including a
$750,000 whole life insurance policy and accrual of extra days
pay not otherwise provided for in his employment contract.
Fernandez repeatedly reassured the board the proposed
revisions were standard, had been reviewed by district counsel
and were based on model bylaws used by districts throughout the
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state. Fernandez also insisted the revisions were necessary to
bring the district up to date since the existing bylaws and policies
were decades old. The board relied on these misrepresentations
in voting to approve the bylaws. There is no evidence any board
member suspected potential criminal conduct, nor is there
evidence to compel the inference as a matter of law that the
board’s reliance on Fernandez’s misrepresentations was
unreasonable. Only Ms. Ramos testified to her frustration and
annoyance at having the revisions rushed through the approval
process. She did not testify to having any suspicion of criminal or
fraudulent misconduct.
c. Counts 6, 7 and 8
Counts 6, 7 and 8 allege conflicts of interest in violation of
Government Code section 1090 and Penal Code section 424,
subdivision (a), based on Fernandez using district lawyers for his
own personal benefit in drafting his contract extension and in
presenting it to the board for a vote without full disclosure of all
the facts material to their decision-making, and based on
Fernandez’s exercise of the home loan option in his employment
contract.
Mr. Rojas was unsure how the home loan option could be
exercised but assumed that if Fernandez chose to exercise it at
some point, the loan documents would have to be presented to the
board for review and approval. Ms. Pizano also thought that was
required. She believed Fernandez would have no need to exercise
the option. According to Ms. Ramos, Fernandez told her he had
no intention of exercising the option. The contract stated the
home loan option was intended to provide a loan only if
Fernandez had to relocate and acquire a principal residence in
order to reside in the district. Fernandez already resided in or
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near the district. Fernandez sought only his own personal gain
when he obtained the loan to buy an expensive home a short
distance from his existing home.
Fernandez used district lawyers to draft the loan
documents, at district expense, rather than retain his own
counsel, and he made revisions to the documents that were
beneficial to him. He removed language giving the district
authority to call the loan in the event he was terminated for
cause, limiting the district to calling in the loan only in the event
of his voluntary separation. Fernandez also disregarded
counsel’s advice to obtain board approval of the loan documents
and directed Mr. Hacker to sign the documents as the district’s
designee. None of the board members saw the warrant for the
$910,000 check paid to fund Fernandez’s loan because it was
buried within in a 104-page warrant report on the board’s
consent calendar and issued without a purchase order as was the
normal procedure.
There is no evidence any board member suspected
potential criminal conduct related to Fernandez’s contract
extension or his exercise of the home loan option, or to support
the inference as a matter of law that the board should have
discovered Fernandez’s self-dealing before August 2013 despite
his fraudulent concealment of his criminal acts from the board.
One may question the effectiveness of the board members,
who served on a part-time basis, were largely inexperienced, and
relied heavily on Fernandez to explain and educate them on the
issues on which they were required to give their approval. But
the evidence does not establish as a matter of law that the board
knew or reasonably should have known Fernandez was
scamming the district. And while Ms. Ramos had concerns before
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2013 about the generous compensation and benefits provided to
Fernandez that had raised public criticism from the teachers’
union and the press, that does not prove as a matter of law that
she knew or reasonably should have suspected Fernandez of
criminal conduct.
It was therefore error for respondent superior court to have
resolved the statute of limitations as a matter of law and
dismissed counts 2, 3, 4, 6, 7, 8 and 9. The motion should have
been denied in its entirety. (Lopez, supra, 52 Cal.App.4th at
p. 251 [“If the evidence is in conflict on the question or if
defendant simply fails to establish that the statute has run as a
matter of law, then the motion should be denied.”].)
DISPOSITION
The petition is granted. Respondent superior court is
directed to vacate its order of January 30, 2020, in case
No. YA096660 granting in part and denying in part Jose A.
Fernandez’s motion pursuant to Penal Code section 995. The
court is further directed to enter a new order denying the motion
in its entirety. This opinion is final forthwith as to this court
pursuant to rule 8.490(b)(2)(A) of the California Rules of Court.
GRIMES, Acting P. J.
WE CONCUR:
STRATTON, J.
WILEY, J.
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