April 17, 2014
The embattled superintendent of the Centinela Valley school district — who is under investigation for his massive pay — took out a $750,000 life insurance policy before securing approval from the school board to do so, the Daily Breeze has learned.
That life insurance policy was in addition to a $1 million policy that Jose Fernandez had already taken out. Both were whole-life plans, meaning the premiums paid by the district can be cashed out, like the balance of a bank account.
For 54-year-old Fernandez, whose total compensation of more than $663,000 in 2013 made him one of the highest-paid public school superintendents in the nation, those policies grant him access to even more income, should he choose to surrender the policies and take the cash.
Fernandez today could surrender the larger policy for $154,770 in cash, and the smaller policy for about $83,000, said Rob Damico, an insurance expert who came to this conclusion based on charts in the policies that were obtained by the Daily Breeze.
After giving the school district the 20 percent share of any payout to which it is entitled by contract, Fernandez could cash out both policies and take home about $190,000.
“That’s a nice little bonus he’s getting,” said Damico, a State Farm insurance agent in Signal Hill. “I wish I had been the one that sold this policy. The commission would have been really nice on this thing.”
School experts say it is rare for school administrators to get whole-life insurance policies from their employers. Most public school administrators — and most employees in general — have term-life policies that offer a payout to a beneficiary only in the event of death.
Whole-life policies, on the other hand, double as savings accounts, yielding modest annual returns to the tune of about 2 to 3 percent, Damico said.
Naj Alikhan, communications director for the Association of California School Administrators, said most professionals inside and outside of education have a compensation package that includes some sort of life insurance policy.
“Those policies could come in various forms, from term-life to accidental death and dismemberment to any other configuration,” he said in an email to the Daily Breeze. “Whole life policies are rare in all lines of work.”
But Ken Shelton, the former chief business officer of the Los Angeles County Office of Education, said it isn’t unheard of for administrators to get whole-life policies.
“It happens, but I don’t know the frequency,” he said. “It’s not totally unreasonable.”
In any case, whole-life policies are expensive. The Centinela Valley school district, which oversees three comprehensive high schools in Hawthorne and Lawndale, has been paying New York Life about $56,000 a year in premiums for the $1 million policy, and about $41,000 a year for the $750,000 policy. That adds up to about $97,000 a year, all for premiums.
The $1 million policy was among the many perks enshrined in Fernandez’s employment contract, approved by the school board in December 2009. Documents show Fernandez initiated the policy the next month, securing a plan from New York Life.
Nearly a year later, on Oct. 28, 2010, Fernandez took out a second policy from New York Life, according to documents obtained by the Daily Breeze. The date of issue on that $750,000 policy was Nov. 8, 2010.
However, it wasn’t until the following month, on Dec. 14 of that year, that the Centinela Valley school board approved the second whole-life policy for Fernandez among a batch of revised board polices and administrative regulations. The milieu also included $300,000 whole-life policies for Assistant Superintendents Bob Cox and Ron Hacker, as well as $150,000 term-life policies for all managerial employees, including the school board.
The school board vote wasn’t unanimous.
Voting against it was one board member, Sandra Suarez, who by then had become a lone-wolf dissenter on a board whose core three members were in lock step. (Gloria Ramos abstained on that item.)
Suarez said she wasn’t even aware of the life insurance issue at the time. Instead, she objected to a pattern she was noticing: district officials, she said, would make decisions first, and then seek board approval later. District officials often would try to rectify such matters by making the votes retroactive to an earlier date. Fernandez’s whole-life insurance policy, for example, was made retroactive to the beginning of the school year.
“Certain things he might have wanted done, they did ahead of time,” she said. “It tells us something: The board was not making the decisions; he was making the decisions.”
Reached on his cellphone Thursday, Fernandez declined to comment. The Daily Breeze also emailed detailed questions to Fernandez’s attorney, Spencer Covert. Aside from a follow-up question sent by Covert’s secretary, the office had not responded by Thursday evening.
Fernandez’s compensation package is currently being reviewed by several agencies, including the FBI, the Los Angeles County Office of Education and the Los Angeles County District Attorney’s Office. What’s more, the California Public Employees’ Retirement System also is investigating the matter.
Cox, a longtime administrator in Centinela Valley who is serving as interim superintendent during the multiple probes into Fernandez’s compensation, did not dispute that it appears Fernandez took out the insurance policy before the board approved it.
“This was a district that was driven by one person,” he said. “Now, board members and even senior administrators are trying to come out from under that and to figure out how to do the right thing. That’s what’s going to happen here, and it’s going to be painful for a while, but we’re going to have to show that it’s not business as usual.”
It’s unclear whether that sequence of events amounted to a breach of state education law. Officials from two agencies — the District Attorney’s Office and the county Office of Education — declined to weigh in. Both agencies are refraining from making any further comments until completion of their probes.
Teachers union President Jack Foreman has long sounded the alarm on the policies, saying they are hidden income for Fernandez.
“It’s a gift of cash, but it masquerades,” he said. “The reason it builds cash value is you’re paying a fortune in premiums.”