State Targets 4 Markets, Alleging Labor Violations

Calling it a drastic but necessary step against one of the largest Asian supermarket chains in the Southland, state labor officials ordered the shutdown Wednesday of four California Markets for allegedly violating state labor laws.

The state’s Division of Labor Standards Enforcement issued “stop orders” at four of six markets in the chain for operating without workers’ compensation insurance. But managers defied the order and continued to operate, saying they had just obtained the insurance, state officials said.

The action is the latest episode in a long-running legal battle between state officials and Richard Rhee, a prominent member of the Korean American community whose rags-to-riches story and militant defense of his market during the Los Angeles riots brought widespread attention.

“We have a history of dealing with Mr. Rhee’s business practices,” said Rick Rice, a spokesman at the labor standards office. “Closing these stores may be deemed drastic but we feel it’s necessary. Closing them will obviously force him to deal with these issues.”

Rice said the move to shut down the markets was highly unusual because most large businesses are diligent about maintaining workers’ compensation insurance.

Rhee’s chain of supermarkets serve as hubs in Koreatown, Garden Grove and other Asian centers in Southern California.

Rhee, 60, could not be reached for comment Wednesday. But Raymond Riley, who along with former Los Angeles Dist. Atty. Ira Reiner represents Rhee, downplayed the significance of the stop order. He said, “This is not the first time they’ve erroneously issued a stop order” against Rhee.

Rhee is no stranger to struggle and controversy. He came to Los Angeles from Seoul as a UCLA exchange student in 1959, paying his tuition by washing dishes and sweeping floors. He dropped out of school but in the early 1970s used his savings to invest in real estate. He bought his first California Market, in Koreatown, in 1986, and has since built the business into a multimillion-dollar chain.

During the Los Angeles riots, Rhee drew nationwide attention for turning his Koreatown market into an armed barricade and saying, “I’ll shoot and worry about the law later.” His market was unscathed.

Last year Rhee was cited by the state Division of Labor for 5,934 violations involving regulations on cash pay, overtime, minimum wages, record-keeping and demanding wage kickbacks. The division is seeking more than $2.2 million in back wages and penalties from Rhee. The case is pending in Los Angeles Superior Court.

Rhee also faces multiple criminal counts of failing to file unemployment insurance reports, falsifying such reports and not paying unemployment insurance taxes of $237,594. He has pleaded not guilty, and a preliminary hearing has been set for next Wednesday, said Richard A. Lowenstein, deputy district attorney.

And last week, agents of the state Department of Justice and the Board of Equalization--who are investigating whether Rhee underpaid sales taxes--searched all six California Markets as well as Rhee’s house in Los Angeles and his Mercedes-Benz.

Riley said the state Board of Equalization was unfairly targeting Rhee. He said the agency charged that he failed to pay almost $15 million in sales taxes for an eight-year period. But Riley said his firm’s audit indicated that the amount is about $1.5 million--which he said was relatively minor given the huge volume of business at Rhee’s supermarkets.

A spokesman at the Board of Equalization declined to comment about the case, saying the investigation is continuing.

Authorities seized about 240 boxes of receipts and other records from the supermarkets and nearly $200,000 in cash, most of that found in his home and his cars, said William King, special agent supervisor at the Justice Department in Los Angeles.

“It’s unusual for these cases to escalate into a criminal case,” he said.

The stop orders, along with citations charging $1,000 per employee for not having insurance coverage, were issued at California Markets on Western Avenue in Koreatown, Garden Grove, Gardena and Rowland Heights. There are two other California Markets, in Norwalk and on Beverly Boulevard in Los Angeles, but state officials said they did not cite those stores because they apparently had workers’ compensation coverage.

Rice, the labor spokesman, said managers at the four supermarkets showed the same binder, or paperwork, from an insurance broker that indicated a policy from California Compensation Insurance was in force, effective Monday.

Rice said the labor division will seek to verify today that each store is currently covered. If not, he said, his agency will move immediately to close down the stores, by a court injunction if necessary.

Steve Saporito, underwriting manager of California Compensation Insurance in Orange, said Wednesday that his records showed the policy for California Market in Garden Grove had been canceled for nonpayment. Saporito said he found no record of other California Markets, although he said it may not have been filed in the computer yet.