Contractor for taxpayer-funded projects in Newport Beach, Anaheim, other cities faces wage theft allegations

The owner and foreman of a Fullerton-based construction company that took on taxpayer-funded jobs in Orange, Los Angeles, Riverside and San Bernardino Counties face felony allegations of wage theft and fraud.

The owner of Towo Enterprises Inc., Yun Su Chung, and the company’s foreman, Jae Weon Kim face allegations of conspiracy and lying to discourage an injured worker from receiving benefits. The owner of the company has also been charged with 14 additional felony counts, including intent to evade taxes and falsifying official documents.

They pleaded not guilty in December and were released from custody after posting bail. Their next court date is set for April 23, according to online records.

Their charges were sparked by an investigation by the non-profit Center for Contract Compliance that began over three years ago, representatives for the organization said Wednesday in a news release.

“The offense was not discovered earlier because Yun Su Chung, the owner of Towo Enterprises, Inc. and his superintendent, Jae W. Kim directed employees to lie to compliance inspectors at job sites,” attorneys with the Orange County district attorney’s office wrote in a criminal complaint filed Dec. 12.

At least five people working for Towo Enterprise Inc. came to the Center for Contract Compliance in October 2021. They reported that the company was providing less than the prevailing wage mandated by state law. One said they had been injured on the job but did not get worker’s compensation pay .

Prosecutors claim Chung tried to conceal wage theft and reduce his premiums by providing inaccurate information to his worker’s compensation insurance providers. The costs saved by allegedly doing so would have given his company an unfair advantage over other contractors competing for publicly funded jobs.

“Wage theft and insurance fraud not only affect workers but also have a direct impact on a public agency’s ability to deliver high-quality projects on time and within budget,” Center for Contract Compliance Executive Director Branden Lopez told the Daily Pilot in an email Friday. “...When contractors underpay employees—pocketing funds meant for their wages — the quality of work suffers.”

Towo Enterprises Inc. did work that was paid for by taxpayers in numerous cities across Southern California between April 2019 and November 2022, according to court documents. Some of their projects included the remodeling of the amphitheater at the Upper Newport Bay Nature Preserve, the Orange Coast College horticulture program’s greenhouse and the East Broadmoor Trail at Santiago Canyon College, as well as street repairs and improvements in Anaheim, Brea, San Clemente and Ontario.

In the 2020-2021 fiscal year alone, the California Labor Commissioner’s office issued 516 citations to contractors hired for publicly-funded projects who had shorted their workers over $10,979,508 in wages. That’s almost 20% of the combined $56,949,252 withheld by employers caught breaking labor laws in both the public and private sector that year.

“The CCC uncovers around $5-to-7 million annually in wage theft on public work projects,” Lopez said. “The labor commissioner cites contractors for two or three times more than this annually. This does not include any of the cases in situations when an aggrieved worker hires their own attorney to sue for back wages.”

Research suggests the true cost of wage theft may be exponentially higher than the value reported to state officials. A study conducted by the Rutgers University School of Management and Labor Relations estimates workers in Los Angeles, Orange, San Diego, San Francisco and Santa Clara counties lost an average of $2.3 billion to $4.6 billion in pay annually due to minimum wage violations between 2014 and 2023.