Updated: Nov 4, 2021
Some of the biggest names in the hotel industry, such as Marriott and Hilton, regularly benefit from contractors with questionable business practices, BDN has found. An investigation uncovered that this is increasingly commonplace in Southern California, as well as Arizona and other locations across the Southwest. The corruption is oft-times overt, and many of the contractors have track records of wage fraud, tax fraud and worker exploitation, yet they are still regularly working at the hotel giants’ jobsites.
Newport Beach Marriott Hotel & Spa a Prime Example
Recently, BDN reported on the chaos and confusion caused over Newport Beach Marriott Hotel & Spa's new remodel, which caused numerous complaints and cancellations from guests.
Marriott is using General Contractor R.D. Olson for the massive renovation that has been ongoing since the beginning of summer. There have been daily protests against R.D. Olson, as well as subcontractor, G Brothers. Protestors have noted that the contractors are not paying the area standard for wages and benefits. This is not the first time that R.D. Olson has been caught working with shady players in the construction industry.
R.D. Olson has a history of using a subcontractor that exemplifies the corruption rampant within the hotel industry. From 2013 to 2017, R.D. Olson awarded over $24 million in contracts to Fullerton Pacific Interiors. Fullerton Pacific Interiors worked on hotels for multiple Marriotts, hotels for Hyatt, Homewood Suites by Hilton, Bicycle Club Casino in Bell Gardens, and multi-million dollar apartment buildings.
Three years ago, Fullerton Pacific Interiors was cited nearly $2 million for cheating 472 workers out of wages and rest periods by the California Labor Commissioner's Office. The OC Register reported that "Fullerton Pacific Interiors shortchanged employees on 26 hotel, recreation and casino projects across Orange, Los Angeles and San Bernardino counties from 2014 to 2016."
The husband and wife owners, Albert and Mirella Mordoki, were arrested in 2019 for tax evasion and workers compensation fraud. As a singular event, this is alarming enough but what is more alarming is that they were able to bid major contracts after a decades-long checkered past, which includes being found guilty for bank fraud in 2005, serving a two year sentence for workers compensation fraud in 2007, and having their contracting license revoked in 2009.
Scourge of Southern California
There is an epidemic of bad actors winning hotel contracts, not just in Orange County, but throughout Southern California, with a network of labor brokers trafficking workers up from Mexico.
In San Diego, one of the worst offenders is Troon construction. In a 2019 legal action that parallels that of proceedings taken against Fullerton Pacific, Troon, its subcontractors, and labor brokers were hit with 17 wage citations totaling $1.3 million. The Labor Commissioner levied the citations for issues including: non-payment of wages; failure to provide workers compensation; non-payment of overtime and misclassification of independent contractors.
A handful of complaints lodged against them within the last year demonstrate that Troon apparently persists with the same business practices even after 2019's legal action. One recent complaint claims that, "They are thieves" who have "no problem in not paying trades", and warns workers to "be aware . . . if (you) want to work for free go with them, they should be in jail."
Evidence of Cash Pay, Wage Fraud by Hotel Contractors in Arizona
In Arizona, where Troon is based, BDN uncovered multiple other hotel contractors who are allegedly just as corrupt.
BDN recently obtained exclusive video of workers for Apodaca Wall Systems, a subcontractor who built the Marriott Hotel and Conference Center in Chandler and the AC Hotel Downtown in Phoenix, and Economy Drywall, who worked on the Residence Inn Marriott in Avondale, claiming they were being paid in cash.
BDN reviewed the videos that show multiple Apodaca and Economy workers on various job sites in Arizona admitting to being paid in cash.
A source tells BDN that cash pay and wage fraud is rampant in the Arizona construction industry and that "cash pay is a sure sign that workers are being exploited and fraud is occurring."
Hotel chains willing to overlook this behavior are being pressured by activists to hire reputable contractors, but despite public awareness campaigns and protests, many of the biggest names in the hotel industry continue to sit back and apparently do nothing about these shady contractors.
Bad for Business
The situation involving the Newport Marriott Hotel & Spa is not a singular example. Many of the top hotels benefit from contractors that operate in ways that cross the limits of legality. Wage fraud, tax fraud and worker exploitation are the dirty secrets that serve as the foundation for the luxury accommodations that wealthy tourists expect.
Whatever upshot the hotels think they'll gain by below-the-board contractors to manage and/or build their site, the negative publicity hardly seems worth it. As the bad players in the industry continue bidding and winning jobs, it begs the question of how much pressure will it take for the hoteliers behind Marriott and Hilton to say enough is enough. It can't behoove them to get dragged into District Attorney investigations and risk the possibility of multi-million dollar penalties involving their projects and bad press just to gamble on cut rates that are too good to be true and will most likely cost more in the end. Hotels must learn not to encourage or allow these contractors and learn to make sure that only responsible contractors are hired to get the job done right the first time.
With business travel down 85% due to the COVID-19 pandemic, and hotels relying on family vacations more than ever, using criminal contractors risks not only putting hotels’ family-friendly images in jeopardy, but losing even more business.