In California, workers' compensation premium fraud cases are aggressively investigated by the insurance companies and then presented to local county District Attorney Offices. When these cases are filed, they go back for years and the alleged "fraud" can total large amounts. The most recent filing here in California is no different.
On December 21, 2015, a San Diego County grand jury indicted the owners of Good Neighbor Services, a janitorial company that provides cleaning staff to major hotels across San Diego, Los Angeles and Riverside Counties.
The government alleges that Good Neighbor serviced hotels including The Hotel Del Coronado, Loews Coronado, La Costa Resort and Spa, The Grand Del Marin La Jolla, L'Auberge Del Mar, The Ritz Carlton, Four Seasons, Hilton and Hyatt hotel chains.
This was brought by Indictment which allows the District Attorney's Office to keep the investigation secret andd not allow the people charged the opportunity of challenging the evidence in a preliminary hearing.
The Indictment named Hyok "Steven" and Woo "Stephanie" Kwon as the owners, and indicted them on 11 counts of workers' compensation premium fraud, 18 counts of payroll tax evasion and one count of extortion. Six co-defendants have also been charged with workers' compensation premium fraud and tax evasion. They are Melquiades Brizuela Jr, Manuel Rodriguez, Veronica Lucas Cuin, Aimee Sunmyung Kwon, Daniel Kwon and Hyun Bung Chae for their alleged involvement as straw owners.
An Indictment is not evidence and the individuals charged are presumed innocent.
The Indictment alleges that there was the use of six straw owners which were allegedly used to conceal the existence of hundreds of hotel workers to avoid paying additional insurance premiums and payroll taxes. There are means in which companies subcontract out workers or use other businesses, and it will be up to the government to prove beyond a reasonable doubt that there was fraud here.
The DA alleges that for almost 10 years, Good Neighbor Services concealed their real payroll information in order to fraudulently obtain workers' compensation insurance from multiple companies including Travelers, Norguard, AIG, Southern Insurance, Everest National, Preferred Employers, State Compensation Insurance Fund and Employers Compensation Insurance. In doing this, it is alleged that the company avoided paying more than $3.6 million in insurance premiums and evaded paying over $3.3 million in payroll taxes.
The DA is seeking to expand this case and bring in evidence that workers were abused. This is being done to make the owners of the company seem less than sympathetic.
In cases like this, expert witnesses are key as are the facts relating to the structure. Companies who outsource their workers should rely on accountants, attorneys and others to establish good faith. This case will undoubtedly take time to resolve as Mr. Kwon was just arraigned and the others will not be arraigned until next month.
Posted by Tracy Green, Esq.Office: 213-233-2261