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The owner of a San Diego janitorial company pleaded guilty on March 14^th to seven felonies for workers’ compensation premium and employment tax fraud.   Hyok Kwon, owner of Good Neighbor Services, serviced some of San Diego’s most exclusive hotels, and some in Los Angeles and Riverside counties, such as 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, The Hilton, and Hyatt Hotel chains. 

Hyok “Steven” Kwon stipulated to an eight-year prison sentence and restitution exceeding five million dollars.  He had been indicted by a grand jury in December of 2015 by the San Diego District Attorney’s office along with codefendant Woo Hui Kwon and six accomplices. 

Woo Hui Kwon “Stephanie” pleaded guilty on December 6^th 2016 to two counts of premium fraud and two counts of employment tax fraud.  She was sentenced to a four years and eight months prison term with restitution that also totaled over five million dollars to insurance carriers and California’s Employment Development Department.

The investigation uncovered a methodical and systematic scam spearheaded by the Kwons using six straw owners in a shell game. The 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. 

San Diego District Attorney Bonnie Dumanis issued this statement on December 21, 2015:  “These defendants lied on the backs of their employees who were cleaning rooms in some of the most prestigious hotels in California.  If employees got hurt on the job, they were threatened with being fired.” 

She went on to further state, “When cheaters scam insurance companies and lie their way out of paying taxes, ordinary citizens end up footing the bill.  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 almost 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 dollars in insurance premiums and evaded paying over 3.3 million dollars in payroll taxes. 

Employees who were interviewed said they were paid with checks bearing the names 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 injured on the job.  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 was sent to a dentist as opposed to a physician. 

California Insurance Commissioner Dave Jones issued this statement in December 2015:  “The Kwons treated their workers like chattel when they fraudulently did not provide workers’ compensation insurance coverage for their workers.  While hundreds of Good Neighbor Services 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 dollars that should have been paid for workers’ compensation and unemployment insurance.”

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.

lonce@adjustercom.com, Lonce LaMon, journalist