Labor Officials Say 2 Markets Lack Insurance

One day after California Markets defied government orders to cease operations at four of its stores, state labor officials Thursday said they have confirmed that two of the supermarkets are operating illegally and that they would take court action to shut them down.

“Our investigators are going to go out there [today] and if they’re not shut down, we’ll get an injunction,” said Jose Millan, assistant labor commissioner.

The two stores, in Koreatown and Garden Grove, are among six in the California Market chain, one of the largest Asian supermarket businesses in Southern California. The chain is owned by Richard Rhee, a prominent member of the Korean American community.

Rhee’s business practices have come under increasing scrutiny from a number of government agencies in the last two years. On Wednesday, state labor agents took the extreme step of issuing “stop orders” against four of his markets for allegedly operating without workers’ compensation insurance.

Managers at the stores, however, ignored the orders, saying they had obtained the insurance from a company called California Compensation Insurance. The managers showed state investigators a binder, or paperwork, written by an insurance broker that indicated a policy was in effect as of last Monday.

After meeting Thursday with managers of California Compensation Insurance in Diamond Bar, labor officials said a California Market in Gardena that they had ordered to close did, in fact, have workers’ compensation coverage. But the stores in Koreatown and Garden Grove were not covered by the insurance company, labor officials said. The status of the fourth store, in Rowland Heights, was unclear.

Rhee could not be reached for comment Thursday, but his attorney, former Los Angeles County Dist. Atty. Ira Reiner, disputed the state’s conclusion. Reiner said four of the six California Markets are clearly covered by workers’ compensation insurance.

Reiner acknowledged California Market stores in Koreatown and Garden Grove had been operating for some period without the insurance. But, Reiner said, a licensed insurance agent for California Compensation Insurance wrote a valid policy on the day the stop order was issued.

“It is not really a problem,” Reiner said. He said the markets will remain open despite the state’s pledge to shut them down, adding, “It won’t come to that.”

California Compensation Insurance executives did not return calls Thursday.

Rhee also faces a host of other actions by state agencies. The Division of Labor Standards Enforcement is demanding in Los Angeles Superior Court that he pay more than $2.2 million in back wages and penalties for allegedly violating regulations on overtime, minimum wages and record-keeping, among other things. Rhee has also been charged with multiple criminal counts for failing to pay unemployment insurance taxes of $237,594, among other charges related to the taxes.

Last week, the state Department of Justice and the Board of Equalization seized about 240 boxes of records and almost $200,000 in cash from Rhee’s supermarkets and home. Those agencies are investigating whether Rhee underpaid sales taxes, which Reiner’s firm estimated at $1.5 million.