Public records uncovered by the Guardian reveal that a Washington Court House city councilwoman received a taxpayer-funded loan to grow her personal business. The loan was recently subordinated by the city manager and now, a request for criminal charges has been filed.
Brick and Ivy, LLC, the legal name for Back-En-Thyme floral shop, 101 East Court Street, Washington Court House, received a $50,000 loan from the city through a fund known as the “revolving loan” fund; the floral shop is owned by Washington Court House city councilwoman Kendra Redd-Hernandez and her then-husband, Joselito and they are both named as co-borrowers with the business.
The loan, which comes with a 6% interest rate, was taken out by Hernandez and her former husband in 2006, and as of September 27, the monthly payment was $230; the loan is not scheduled to be paid off until 2027 and it currently has an outstanding balance of $25,220.
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In exchange for the loan from the city, a lien was placed on the building that houses Hernandez’s business on the corner of Court and Main Streets in downtown. Just last month, Hernandez took out another $83,000 loan from First State Bank, again, placing the building up as collateral, leaving it with at least two mortgages; that loan is set to be paid off in 2039.
It is the “second” loan that has spiraled a request for criminal charges and an independent review from an outside source.
In order for the local bank, First State Bank, to approve the new $83,000 loan, the city had to take a “back seat” to their loan by agreeing to what is known as a “subordination” agreement. What that means is, the new loan becomes the “priority loan” and the $53,000 loan by the city becomes second; if Hernandez was to default on either loan and foreclosure proceedings were to start, the city could not collect their money until after the bank had recouped their money, first.
The subordination agreement was signed on September 3, 2019, by City Manager Joe Denen, agreeing that the 2006 tax dollar funded loan would become second place, which allowed the new bank loan to be pushed through. City Councilor Caleb Johnson said that the rest of city council was not approached about the subordination when Denen signed it.
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“This is the first I’m hearing of this subordination or the possible conflict, if such a conflict exists,” Johnson said.
Because Hernandez is on city council, she is one of the city manager’s superiors, and that has called into question if Hernandez has committed a crime of conflict of interest.
“If an elected official goes to an employee and asks them to make a decision that would financially benefit the elected official, that creates a conflict of interest and it is a crime,” said an official with the Ohio Elections Commission. Most notably recently, Pike County Sheriff Charles S. Reader was indicted with three counts of conflict of interest for allegedly asking deputies and vendors for loans.
“The people deserve the truth. They deserve an independent analysis of what happened,” Councilor Johnson said. He has called for an independent review.
Hernandez’s building is only valued at $97,000, according to Fayette County property records. With two mortgages totaling more than $135,000, the odds that the city would ever receive their money in the event of a foreclosure is slim.
“When a foreclosure is sold, it may only bring a third of what the property is truly worth at auction,” said Bob Smith, a real estate agent. “In this case, a building worth almost $100,000 is likely to bring less than $50,000 at auction.” The new priority lender — First State Bank — would be entitled to all of the money, if that were the case, leaving the city in the dark.
The Guardian spoke with a person who is an expert in political science.
“As the charter is written today, potentially Hernandez is in violation of the city’s constitution if she did not follow proper disclosure instructions in the city charter and subsequently, city code.” Specifically, they pointed out section 12 of the city’s charter, which reads that a city councilperson cannot use their position to financially benefit them.
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They also made note of section 4.3 of the charter, which reads that no person may hold elected office with the city while having a contractual interest with the city.
The Guardian reached out to the city manager for comment, who did not respond to our requests for an interview.
This publication also reached out to Kendra Redd-Hernandez for comment, who equally did not respond to our requests for an interview.
A complaint has been filed with Judge Steven P. Beathard’s office through a citizen’s affidavit seeking criminal charges against Hernandez, including a felony of unlawful interest in a public contract and a misdemeanor crime of conflict of interest. The Judge will have to make a determination if there is probable cause for the charges.
Hernandez was elected to city council nearly four years ago in 2015, after the loan was taken out; but the subordination letter was signed last month by the city manager that allowed Hernandez to get $83,000. Hernandez’s term on city council expires at the end of this year, but she has filed to run for re-election.
Editor’s note: A previous version of this article said Councilman Caleb Johnson called for a BCI investigation. Johnson did not say that would occur, yet, but has called for an independent analysis.