News: 2017 Press Release
For Release: March 15, 2017
Media Calls Only: 916-492-3566
Janitorial company owner enters guilty plea in multi-million dollar premium and tax fraud case
Case Update:
Hyok
Kwon, owner of Good Neighbor Services, a janitorial company that
provided services to some of San Diego's most exclusive hotels and
resorts pleaded guilty yesterday to seven felonies, including premium
and employment tax fraud in an elaborate scheme to avoid paying workers'
compensation insurance premiums and employment taxes. Kwon stipulated
to an eight-year prison sentence and to pay restitution exceeding $5
million.
Woo Hui Kwon pleaded guilty on
December 6, 2016 to two counts of premium fraud and two counts of
employment tax fraud. She was sentenced to four years and eight months,
and restitution that totaled over $5 million to insurance carriers and
Employment Development Department.
Original news release below issued by San Diego District Attorney Bonnie Dumanis on December 21, 2015 –
SAN DIEGO, Calif.
- San Diego County District Attorney Bonnie M. Dumanis announced today
that a grand jury has indicted the owners of Good Neighbor Services as
well as six accomplices for a massive, ongoing insurance fraud and tax
evasion scheme. Two defendants, Hyok "Steven" and Woo "Stephanie" Kwon,
own a janitorial company that provides cleaning staff to major hotels
across San Diego, Los Angeles and Riverside Counties, 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.
The Kwons have been
indicted on 11 counts of workers' compensation premium fraud, 18 counts
of payroll tax evasion and one count of extortion. The investigation
uncovered a methodical and systematic shell game involving six straw
owners. These straw owners were used to conceal the existence of
hundreds of hotel workers to avoid paying millions of dollars in
insurance premiums and payroll taxes. If convicted of all charges, they
each face up to 31 years in prison.
"These defendants
lied on the backs of their employees who were cleaning rooms in some of
the most prestigious hotels in California," DA Dumanis said. "If
employees got hurt on the job, they were threatened with being fired.
Insurance fraud and tax evasion is not a victimless crime.
"When
cheaters scam insurance companies and lie their way out of paying
taxes, ordinary citizens end up footing the bill," DA Dumanis said. "Our
insurance fraud team did an excellent job collaborating with the
California Department of Insurance and state investigators to
investigate and prosecute the Kwons."
For nearly a
decade, 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, the
company avoided paying more than $3.6 million in insurance premiums and
evaded paying over $3.3 million in payroll taxes.
Employees
who were interviewed said they were paid with checks bearing the name
of businesses other than Good Neighbor Services throughout the course of
their employment, even though they wore uniforms with the Good Neighbor
Services' logo and identified the Kwons as the owners. 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. One employee said 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.
"The Kwons treated their workers like
chattel when they fraudulently did not provide workers' compensation
insurance coverage for their workers," said Insurance Commissioner Dave
Jones. "While hundreds of GNS employees working as janitors put in long
hours to make money for the Kwons, Steven and Stephanie Kwon allegedly
put the health and well-being of these workers at risk and ripped off at
least $6.5 Million that should have been paid for workers' compensation
and unemployment insurance."
The District Attorney's
Office is asking additional employees who worked with the Kwons and were
denied workers' compensation benefits to come forward. Anyone with
information about the abuse of employee rights or the Kwons' use of
shell companies should call: 800-315-7672 or 800-927-4357.
The
San Diego District Attorney worked with the California Department of
Insurance, Employment Development Department, Maintenance Cooperation
Trust Fund, and Department of Industrial Relations to bring this
complicated, underground economy case to light. The extensive amount of
fraud would not have been uncovered without the efforts of these
community partners.
"Workers' compensation premium
scams are deeply unfair to honest businesses that play by the rules,"
said Dennis Jay, Executive Director of the Coalition against Insurance
Fraud. "Cheaters gain an unfair competitive advantage and raise workers'
compensation premiums, which are passed along to consumers in higher
prices."
Steven Kwon will be arraigned today at 1:30 p.m. in Dept. 11 of the San Diego Superior Court.
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 involvement in the scheme. They face sentences
between six and eight years in prison. The co-defendants are expected to
appear in court on January 5, at 1:30 p.m. in Department 11 of the San
Diego Superior Court.
The California Department of Insurance, established in 1868, is the
largest consumer protection agency in California. Insurers collect $288
billion in premiums annually in California. Since 2011 the California
Department of Insurance received more than 1,000,000 calls from
consumers and helped recover over $394 million in claims and premiums.
Please visit the Department of Insurance web site at
www.insurance.ca.gov.
Non-media inquiries should be directed to the Consumer Hotline at
800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf
(TDD), please dial 800.482.4833.
