Penalties, Back Wages Sought Against Grocer : Labor: State officials say owner of supermarket chain owes more than $2.2 million and violated numerous laws.

Calling it an egregious example of the underground economy in Southern California, state officials are seeking back wages and penalties of more than $2.2 million against the owner of seven Asian supermarkets in Orange and Los Angeles counties.

The Division of Labor Standards Enforcement have filed civil charges against Richard Rhee, 59, accusing him of numerous labor law violations, including paying workers in cash to avoid payroll tax deductions; demanding wage kickbacks, and multiple violations of minimum wage, overtime and record-keeping laws.

Last month, the Los Angeles County district attorney’s office also filed criminal charges against Rhee, who lives in Los Angeles. Rhee has pleaded not guilty to the charges.

Rhee’s attorney, Donald H. Steier, said he could not comment on the civil allegations because he had not received documents supporting the state’s accusations.

“Mr. Rhee is upset about the allegations, but we’re not in a position to defend them until we have the information,” Steier said. He complained that state officials have not kept him or his client adequately informed about the investigation and its findings.

In all, state investigators cited Rhee with 5,934 violations involving 482 workers at his California Markets in Los Angeles and Garden Grove, according to records released this week. State officials, who had not earlier publicized their allegations, decided this week against seeking a settlement with Rhee.

“It’s one of the biggest cases we’ve found in the underground economy,” said Jose Millan, the state’s assistant labor commissioner.

A two-year investigation was conducted jointly with the state Employment Development Department as part of a broader effort to crack down on the underground economy, where employees are paid in cash to avoid various taxes and other government regulations.

Based on the EDD’s findings, the district attorney’s office charged Rhee with multiple criminal counts of failing to file unemployment insurance reports, falsifying such reports and not paying unemployment insurance taxes totaling $237,594 for the period covering early 1987 to mid-1992. If convicted, Rhee faces a maximum of six years in prison.

Rhee, one of Southern California’s most successful Asian immigrant entrepreneurs, pleaded not guilty last month to the 51-count criminal complaint filed in Los Angeles County Superior Court. A preliminary hearing has been set for May 10, said Richard A. Lowenstein, deputy district attorney.

According to the state’s investigation reports, officials inspected the two California Markets in 1991 and ’92 after receiving numerous complaints from employees. Subsequent audits showed that the stores’ mostly immigrant workers were putting in as many as 60 hours a week, for which they were paid $220 to $240 without overtime compensation.

State officials, who have filed a civil lawsuit to recover the back wages, also alleged that California Market’s wage policy called for a 5% payroll deduction to workers who received cash payment--what officials said amounted to an illegal kickback.

“The employer was requiring employees to pay the employer to keep their jobs,” Millan said.

Steier said he was unaware of any allegations of kickbacks. “It’s the first I’ve heard of it,” he said.

Rhee gained national attention in 1992 during the Los Angeles riots when he and others were captured on television pacing on the rooftop of the California Market in Koreatown, brandishing weapons to ward off looters.

California Markets, of which there are six in Los Angeles County and one in Orange County, primarily serve the area’s large Korean American population. Most workers at the California Markets are Koreans and Latinos.

With meager savings, Rhee started in business as a garment contractor, and in 1986 bought out the lease of what was then Mayfair Market on Western Avenue in Koreatown and converted that into his first California Market.

As Rhee’s operations have expanded, he has clashed with mom-and-pop Korean grocers in various parts of Southern California, who have complained that Rhee’s markets, which are larger and lower-priced in many cases, make it difficult for smaller stores to compete.