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 this week 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.

The two defendants 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 were indicted by a grand jury 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 would have faced up to 31 years in prison.

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.

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.

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.

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.