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San Diego County DA Looking for Victims of Restaurant Payroll Scheme

The San Diego County District Attorney's office is looking for additional victims of an alleged payroll scheme at a College Area restaurant.

Bonnie M. Dumanis, San Diego County's district attorney, announced today in a news release that a grand jury has indicted two defendants on a total of 21 felony counts in an alleged ongoing payroll scheme that violated minimum wage and California theft laws at the now shuttered State Street Grill on College Avenue.

David Dadon, 61, and his son Barry Dadon, 27, both face charges of workers' compensation premium fraud, payroll tax evasion, sales tax evasion, and grand theft of labor from 23 victims, officials said. David Dadon also was indicted on one count of the fraudulent removal of property under a lease and two counts of attempted extortion.

During a two-year period, it is alleged that the defendants hired more than 20 servers and cooks, many of them college students, to work at the State Street Grill but did not pay them after a week of work or offered them a wage of less than $5 an hour.

"The defendants in this case repeatedly took advantage of victims who were in desperate need of income and who accepted an offer to work during a 'trainee period,'" Dumanis said in a statement. "The estimated loss in this case exceeds $350,000 and we're encouraging any additional victims of this heartless scheme to come forward."

David Dadon faces up to 21 years in prison and Barry Dadon 18 years, as well as possible restitution to the victims, if convicted of all of the charges. Barry Dadon pleaded not guilty on April 4 and was released on $200,000 bail. The elder Dadon will appear in Superior Court in downtown San Diego at 1:30 p.m. today.

The California Labor Commissioner's Criminal Investigation Unit conducted the original investigation of the San Diego restaurant and then referred the case to the district attorney's Insurance Fraud Division.

Investigators found that besides the 23 known employees who reportedly did not receive their wages earned, as many as 50 potential additional victims are being urged to come forward.

"This is wage theft, pure and simple," said Labor Commissioner Julie A. Su. "All workers in California are entitled to a just day's pay for a hard day's work, and in this case, dozens of employees had their wages stolen right out of their pockets. With this case, we are sending a clear message that such cases will be treated as the crimes that they are."

The defendants allegedly posted immediate replacement of server and cook positions on Craigslist, offering the applicant the job if they agreed to work without pay for the first seven days. This initial week was considered the "training period," officials said.

The victims were told that if the defendants were happy with their performance, the workers would be "put on the schedule" and paid wages, officials said. The trainers reported to investigators that they worked 40 hours per week, many 50 or 60, without pay. The Dadons also allegedly took some of the workers' tips.

Those who were hired after the seven days continued working 50 to 60 hours a week and were fired if they declined to accept a $400 semi-annual salary, officials said. That equaled less than $5 an hour.

"The defendants in this case took advantage of students and others who needed jobs and exploited these victims' desperate need for income for their own personal gain," said Board of Equalization Vice Chair Michelle Steel. "They further victimized their community by taking $108,000 in sales tax collected from their customers and keeping it for themselves. The counts of criminal tax evasion the defendants are facing should send a strong message that defrauding California taxpayers and abusing employees is unacceptable."

State Street Grill closed in December after the San Diego State Research Foundation evicted the owners.

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