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
