Company owners indicted in $7M hotel-worker fraud case

Dec. 21--SAN DIEGO -- The owners of a company that provides janitorial and housekeeping services to luxury hotels across Southern California have been indicted in a $7 million insurance fraud and tax evasion scheme that lasted nearly a decade, prosecutors said Monday.

Hyok "Steven" Kwon and Woo "Stephanie" Kwon, a married couple who owned Irvine-based Good Neighbor Services, are accused of working with six accomplices to hide the existence of at least 800 of hotel workers and avoid paying $3.6 million in workers' compensation insurance and $3.3 million in payroll taxes.

District Attorney Bonnie Dumanis, appearing at a downtown news conference with state Insurance Commissioner Dave Jones, called the case the largest ever insurance premium fraud in San Diego history.

"These defendants lied on the backs of their employees who were cleaning rooms in some of the most prestigious hotels in San Diego," Dumanis said. "If employees got hurt on the job, they were threatened with being fired."

Among the hotels were the Hotel Del Coronado, Loews Coronado, La Costa Resort and Spa, the Grand Del Mar, L'Auberge Del Mar, The Ritz Carlton, Four Seasons, Hilton and Hyatt hotel chains. Prosecutors said there has been no indication throughout the lengthy investigation that the hotel owners and operators were aware of any fraud.

During the course of the investigation, employees said they were paid with checks with the names of other businesses, even though they wore uniforms with the Good Neighbor Services logo and identified the Kwons as the owners, according to the District Attorney's Office.

The employees also said they did not receive overtime pay or workers' compensation benefits when they were injured on the job, and they feared retaliation if they reported their injuries, Dumanis said at the news conference. One employee reported that she had to repeatedly ask for medical attention for her injury.

"When she was finally sent to a doctor, she found out later the Kwons sent her to a dentist rather than a physician," Dumanis said.

According to Commissioner Jones: "The Kwons treated their workers like chattel when they fraudulently did not provide workers' compensation insurance coverage for their workers."

State and local authorities first became aware of a problem when they were notified by the Maintenance Cooperation Trust Fund, a statewide watchdog organization that works to abolish illegal and unfair business practices in the janitorial industry.

Lilia Garcia, the watchdog group's executive director, said one of Good Neighbor Services' competitors notified the organization of possible illegal conduct in 2010 and referred them to employees with complaints.

State insurance authorities investigated the case over three years.

The Kwons face 11 counts of workers' compensation premium fraud, 18 counts of payroll tax evasion and one count of extortion. If convicted, they face up to 31 years in prison.

Steven Kwon, 62, pleaded not guilty Monday afternoon in San Diego Superior Court. According to online jail records, he was booked into San Diego County jail Friday.

Stephanie Kwon, 59, is in custody in Orange County. She expected to be arraigned later.

Six co-defendants face similar charges in San Diego Superior Court, although prosecutors have not said specifically what their roles were in the fraud scheme were. They are expected to be arraigned Jan. 5.

The co-defendants are Melquiades Brizuela Jr, Manuel Rodriguez, Veronica Lucas Cuin, Aimee Sunmyung Kwon, Daniel Kwon and Hyun Bung Chae.

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