Labor Official Is Suspected of Extortion

In a major setback to the state’s controversial garment enforcement program, a veteran labor inspector has been arrested for allegedly extorting thousands of dollars from a small clothing operator. Authorities are still looking into 300 of the inspector’s cases, particularly those involving Korean American contractors, as part of a broadening probe.

Agents at the California Department of Justice say they booked Howard Hernandez, a 17-year labor standards investigator who is also a state deputy labor commissioner, after he allegedly accepted $8,000 last week from a Korean-speaking middleman. The go-between allegedly worked with Hernandez in shaking down the garment shop’s owner, whose only official labor violation was failure to report a new business address.

Hernandez had threatened to shut down or confiscate goods at the Los Angeles shop, called Two Thumbs Up Apparel Inc., for the minor violation, which came with a $400 penalty, according to interviews and records.

George Fawrup, the Justice Department’s special agent supervisor, said the probe did not extend to any other garment investigator in the Division of Labor Standards Enforcement--a high-profile agency that has had some success in cracking down on rogue contractors but also has been marred by politics and criticisms for its heavy-handed tactics.

Fawrup said agents are investigating reports that Hernandez and his alleged partner, Edwin Kim, who also was arrested last week, may have sought bribes from other Korean American garment businesses, which make up the largest ethnic group operating in the nation’s biggest regional apparel industry. Agents have searched Hernandez’s house in Montebello and are appealing to Korean American contractors for help.

“A lot of our members have that kind of problem,” said Young Oh, a Los Angeles contractor and former president of the Korean-American Garment Industry Assn., which has about 600 member businesses. Oh, however, doubted that other contractors would report their past problems to authorities.

Bribery is believed to be a deep-seated problem in Southern California’s garment industry, with desperate contractors often seeking to gain work by giving cash to manufacturing managers. But rarely have labor inspectors been implicated.

Hernandez, a 46-year-old inspector with a law degree, was placed on administrative leave with pay, in keeping with state civil service procedures. After he was booked last Tuesday night, Hernandez was released on $35,000 bail. He declined to comment on Monday.

Kim, 41, the alleged middleman, was booked on suspicion of bribing a public official and released on $10,000 bail. Kim, reportedly a garment industry businessman, had agreed to cooperate with authorities in setting up the sting operation. He did not respond to several telephone pages.

Senior labor agency officials, concerned about the fallout to their department and program, which recently received some long-awaited budget increases for extra staff, said they would immediately do a “top-to-bottom review.”

“Our front-line investigators have to be beyond reproach,” said John Duncan, acting director of the Department of Industrial Relations, which oversees the Division of Labor Standards Enforcement. The allegations against Hernandez, Duncan added, “can lead to the discrediting of a program that has been at the forefront of fighting sweatshops.”

Duncan and Jose Millan, the state’s newly appointed labor commissioner, said they planned to seek Hernandez’s dismissal after formal charges are filed by the Los Angeles District Attorney’s office, which has not yet received the case from Justice officials. A conviction on an extortion charge carries a maximum jail term of four years.

For garment regulators, the allegations of extortion added to the internal problems that have plagued the agency, including leaks to manufacturers whose goods were being made at the contracting shops under investigation. Millan said, however, that the problem soon ended and that there is no evidence that Hernandez was tied to the leaks.

Hernandez has previously come under scrutiny in the labor commissioner’s office. Just one month ago, he was cleared of allegations raised internally that he sexually harassed a woman investigator with the U.S. Department of Labor and that he either physically or verbally “abused” an employer who was the subject of an inspection.

Millan said he dropped the case against Hernandez after an internal investigation over the previous 10 months failed to turn up credible evidence of wrongdoing. Millan declined to release those investigatory records Monday.

Hernandez generally was a well-regarded investigator and among the best-educated on the staff, Millan said. “He was a friend of mine. I’ve been on many inspections with him.

“He was strict in terms of his enforcement of the law,” Millan said. “Even I observed that he was a model investigator. That made the shock of finding out that there allegedly is another side to him all the more difficult to hear about.”

However, word of Hernandez’s arrest was apparently not a shock to some Korean American garment shop owners. In recent months, several of those contractors called the group’s association to report collusive activities between Hernandez and a Korean middleman, said Patrick Oh, general manager of the Korean-American Garment Industry Assn. However, he said those contractors refused to make formal complaints with authorities, fearful of retribution.

“People are outraged, they’re angry,” Oh said on Monday, calling on the state agency to reform itself ethically.

Others in the Korean American community expressed relief, saying it was about time a contractor stood up despite his fears.

Danny Cynn, owner of Two Thumbs Up, was initially reluctant but was persuaded by his accountant, Ernie Dow of Los Angeles, to report the alleged extortion attempt to authorities. Interviews with Dow, authorities and inspection records showed that Hernandez first visited Cynn’s shop on Aug. 15, citing the firm for not reporting its new address. (Cynn had moved from Commerce to the garment district in Los Angeles.)

Some days later, records show that Hernandez issued a notice to Cynn to appear in downtown Los Angeles with a list of all the names of contractors with which Cynn did business. Cynn, a small-time manufacturer that in industry circles is called a “jobber,” met with Hernandez at the end of August and was told he could lose everything.

The records state that around that time, Kim repeatedly called Cynn, asking if he had $8,000 to take care of the problem. After Cynn contacted authorities and was supplied with cash, he met with Kim at the parking outside Denny’s restaurant in Koreatown. Kim was arrested by a swarm of agents, and hours later Hernandez was apprehended after Kim passed along the cash to him in Montebello. Cynn declined to comment.