Sherman: My encounters with Webio's David Hernandez

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: My encounters with Webio's David Hernandez : Posted by Ed S. : at 6/22/2009 4:48 AM CDT on Chicago Business : When I interviewed David Hernandez June 4 at a private skybox at U.S. Cellular Field, little did I know I was talking to a convicted felon who less than two weeks later would be a fugitive after being charged with running a Ponzi scheme. : No, that doesn't happen to me every day. : I have spent a lot of time thinking about Mr. Hernandez, trying to figure out how he was able infiltrate the highest ranks of Chicago sports. Not only did he launch an Internet sports talk station with Mike North, he also was the title sponsor of Mr. North's "Monsters in the Morning" show on Comcast SportsNet, a major endeavor for executives at the network. He lured former Chicago Fire Commissioner Cortez Trotter to work with him as a consultant. He also had meetings with high-ranking officials of various sports teams, including one with Jerry Reinsdorf at spring training in Arizona. : During our interview on June 4, he said he gave a lot of credit to Mr. Reinsdorf "for fine-tuning our approach." : It seems Mr. Reinsdorf reviewed Mr. Hernandez's business model for Webio and made some suggestions. : Mr. Hernandez really loved this quote from Mr. Reinsdorf: "I might not tell you everything, but I won't lie to you." : Obviously, Mr. Hernandez lied to a number of people. It all came tumbling down for him last week when the FBI alleged he ran a Ponzi scheme through his various holdings. The charges claim Mr. Hernandez used some of the funds to start the now-defunct Webio station. : I had three meetings with Mr. Hernandez. The first came in the downtown offices of his holding company, NextStep, in March. : The meeting included Mr. North, his wife Be-Be, Mr. North associate Jeff Schwartz, and a couple of NextStep staffers. Our meeting took place in a conference room; nice, not overly flashy. Mr. Hernandez and Mr. North proceeded to lay out their vision for Webio. : We both learned we had something in common: our favorite White Sox player is Dick Allen. It was something I brought up the next few times I met him. I even sent him an email with my favorite Dick Allen moments. : I didn't find Mr. Hernandez to be a spotlight grabber like you would see some investors who suddenly found their names in the media. However, he did have an air of supreme confidence about him, almost as if he was going to reinvent the wheel with this Webio idea. He definitely talked a good game, and seemed to have all the answers. : Isn't that always the case with those kind of people? : Naturally, I was skeptical, but was willing to give the idea a chance. : The next time I met him was at a launch party for Webio at Bin 36. It seemed to be a rather lavish event for a start-up station. There was a sound system, and a long presentation featuring Mr. Hernandez, Mr. North and all the talent. Garry Meier and representatives from CSN were among the people to attend the party. : Mr. Hernandez claimed traditional radio was dead, and that the Webio idea was going to transform the industry. : Mr. Hernandez appeared to love every minute of it, and why not? The former WSCR "Score Head" now would be running his own station with the most famous personality ever produced by SCR. A nice rebound for someone who once served time in prison for wire fraud, he must have thought. : Then the station launched, and Mr. Hernandez was spending money like there was no tomorrow. Reporter George Ofman told me Webio approved $1,800 for a plane ticket to send him to Calgary for a Hawks playoff game. This came at a time when virtually every media outlet wouldn't spend 18 cents to send a reporter across the street. : There were prominent billboards, TV advertisements, not to mention decent salaries being paid to station personnel. : "We always wondered where the money was coming from," said Fred Huebner, co-host of the morning show. : Most everyone in the industry thought he was crazy. I figured Mr. Hernandez was just some rich guy who was willing to risk a few million bucks. If it worked out, great. If not, at least he got to hang around some famous sports people for a while. : During our final meeting at U.S. Cellular Field, Mr. Hernandez explained his free-spending approach. : "From my business experience, if you don't support an effort, it won't be successful," Mr. Hernandez said. "I know a lot of things the industry doesn't know." : On that day, Mr. Hernandez had access to two skyboxes. He was throwing a party to celebrate bringing Doug Buffone and Ed O'Bradovich to the station. He accompanied both men down to the field, as Mr. Buffone threw out the first pitch. : Again, it had to be quite a rush for Mr. Hernandez. He had two Bears greats kissing up to him, thanking him for the opportunity to join Webio. Imagine that. : When the woman came around with the dessert cart, I heard her ask who was responsible for the charges. Mr. Hernandez happily grabbed and signed the bill, acting like the big man he truly felt he was that day. I'm guessing his signature meant nothing, and the Sox got stiffed. : No matter, Mr. Hernandez seemed to be in all his glory. He imformed me the two-month old station already was making a profit, a notion I told him I and others didn't believe. : "I know what my revenues are," he insisted. "We are absolutely in a profit." : Of course, I didn't know checks already were bouncing at that time. But that would be a story for another day. : During the sixth inning of that game, Mr. Hernandez excitedly announced, "Everyone look at the scoreboard. Everyone look at the scoreboard." : The scoreboard showed a huge ad for Chicagosportswebio. Mr. Hernandez loved it. Talk about hitting it big, right? : That's the last time I saw Mr. Hernandez. Eight days later, I would learn the beginning of the end of his fantasy was about to come for him. : And that's what it was: A fantasy. As details came out about his alleged Ponzi scheme, you have to wonder if his decision to launch Webio actually led to his undoing. : According to the charges, it appears Mr. Hernandez spent nearly $1 million in various expenses related to sponsoring the "Monsters" show and start-up costs and marketing for Webio. : As a result, it looks as if Mr. Hernandez ran out of cash. When investors stopped receiving their payments, they went to the authorities. : So why did Mr. Hernandez do it? If he was running an alleged fraudulent business, why risk it all with such a public endeavor? : It seems fairly obvious that Mr. Hernandez was a huge sports fan who wanted to be a player. And incredibly for a few months he was. : It all fed into what has to be a huge ego. He truly must have felt he was capable of pulling this off. : Now Mr. Hernandez is on the run from the authorities. In his wake, investors lost money, and his employees, including those at Webio, had their careers severely derailed. : And I can't help but wonder: What's going through the mind of Mr. Hernandez now?

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