Southern California car wash mogul cited for cheating 700 workers and destroying evidence

In the tight-knit diaspora of Persians who migrated to Southern California in the wake of the Iranian Revolution, Vahid David Delrahim is a figure of note.

The owner of some 100 Southern California car washes and gas stations, he has been feted in Beverly Hills as a major donor to the Jewish National Fund which raises millions of dollars a year for Israeli settlements.

Through one of his companies, Platinum Energy, Delrahim was named last November as the buyer of a $9.1 million home in Hidden Hills, the neighborhood that also houses Kim Kardashian and Miley Cyrus.

And his first cousin, Makan Delrahim, who as a Senate aide helped him get federal funds for an interchange near his Agoura Hills car wash, was confirmed in September as President Donald Trump’s anti-trust chief.

But an unusual wage theft case unfolding in a Santa Ana federal court offers a dark picture of the car wash mogul’s businesses and raises ethical issues concerning his lawyers at Littler Mendelson, the nation’s largest management-side employment firm.

The U.S. Department of Labor has charged Delrahim and his managers with cheating some 700 workers at a dozen of his facilities in Orange, Los Angeles, San Bernardino and Ventura counties over a five-year period, failing to pay minimum wage and overtime.

According to prosecutors, the workers, nearly all Latino, were ordered to arrive early, but were not allowed to clock in until customers arrived. When business slowed, they had to clock out but still remain on duty, waiting until more customers turned up. The result: numerous hours without pay.

The government is seeking at least $4 million in back wages and damages.

In court documents, Delrahim’s lead attorney, Los Angeles-based Rebecca Aragon, and her team called the government’s claims “frivolous, vexatious and unreasonable,” arguing that Delrahim was “without sufficient knowledge…to admit or deny” the allegations.

Aragon specializes in helping “companies employing Spanish-speaking workforces” with “union avoidance” and other strategies, according to her law firm biography.

In court documents, Littler Mendelson lawyers said the workers “were engaged in activities that were preliminary or postliminary to their principal activities and thus are not compensable.”

Delrahim did not respond to telephone messages left at his office. Aragon wrote in an email, “We do not comment on client litigation matters.” A labor department spokesman also declined comment.

The case, which so far has lasted 20 months, is extraordinary in that very few federal or state wage and hour disputes end up in court, and a minuscule number last this long. In almost all cases, business owners, when confronted with wage theft evidence, quietly pay up and move on.

That is the outcome in hundreds of claims brought each year by state and federal officials against car washes, garment contractors, caregiver facilities, restaurants and construction firms—the industries with the highest number of wage and hour violations.

But the Delrahim investigation, which began in June 2015 with 63 current and former workers of a single facility, the Brea Car Wash & Detail Center, has turned into a fierce legal slugfest. Three of his Agoura Hills-based companies are also defendants: Southwest Fuel Management, Goldenwest Solutions Group and California Payroll Group.

After more than 200,000 pages of filings, documents, depositions and testimony over nearly two years, and with the case headed to trial, Delrahim’s legal costs could conceivably approach the amount of back wages the government is claiming. Fees at Littler Mendelson range up to $615 an hour.

Even more unusual than the initial wage theft charges, the case has exploded into a battle over legal ethics, offering a window into the hardball tactics of employment litigation.

Shortly after the investigation began, Delrahim and Littler Mendelson were notified of the duty to preserve potential evidence. Nonetheless, text messages, email accounts and videos recording workers’ comings and goings, which prosecutors deemed likely to prove the government’s case, were destroyed, court records show.

Prosecutors, led by the labor department’s regional solicitor, Janet Herold, called for sanctions, including a default judgment. They cited the intentional “wanton destruction” of evidence and a “failure to follow even the most basic rules” of legal practice.

Delrahim and Littler Mendelson responded that texts, email accounts and videos were routinely–but not deliberately–deleted and would not have proven the alleged wage theft. The lawyers asserted it was too burdensome to retain video footage.

In May, retired federal judge Rosalyn Chapman, appointed special master by the court to evaluate claims, found that Littler Mendelson was “deliberately and willfully stonewalling on discovery” and Delrahim had “made an intentional decision not to preserve the video.”

Do similar issues tend to arise in employment cases?

UC Irvine law professor Sameer Ashar who teaches ethics and co-directs the school’s immigrants’ rights clinic, notes, “it may not be exceptional that employers are tempted to tamper with records and with lawyers potentially closing an eye to it.”

Lawyers, he added, “are caught between conflicting duties. On the one hand they must advocate zealously for their clients, but ethical and civil procedure rules require them to turn over records forthrightly and honestly.”

Prosecutors struck another blow in the case by adding Delrahim’s daughter, Shannon Delrahim, as a defendant.

Littler Mendelson had argued that Shannon was a 21-year-old “part-time marketing intern,” enrolled full time at Pepperdine University. But documents subpoenaed from Pepperdine showed that Shannon was actually 26, had listed her job as HR director for her father’s companies since 2009, and attended classes only at night and on weekends.

Then, in November of last year, the case took an even more dramatic turn.

Aragon and her team submitted signed declarations from 37 car wash workers, gathered months before, saying that they had never worked off the clock.

During furious back-and-forth motions over sanctions (for destroying evidence, it turned out), Littler Mendelson, without alerting the court as is customary, had undertaken a stealth campaign to undermine the testimony of government witnesses.

Prosecutors cried foul over “intimidation tactics,” suggesting that Littler Mendelson lawyers “abandoned their ethical duties and failed to safeguard the integrity of the fact-finding process” by pressuring workers worried about losing their jobs if they didn’t agree to sign company documents.

Littler Mendelson lawyers responded that they “acted entirely properly in interviewing… unrepresented employee witnesses and gathering declarations from them in a voluntary and non-coercive manner.”

In an email, Littler Mendelson spokeswoman Jennifer Klein added, “We dispute the DOL’s claims in relation to Littler’s handling of this matter. These court filings speak for themselves.”

Over the course of the case, Delrahim and Littler Mendelson have been sanctioned by the court five times for withholding documents and other “not substantially justified” delaying tactics. They have been ordered to reimburse the government $23,850 in legal fees.

Last month, presiding Judge Fernando Olguin tossed out the declarations from 37 car wash workers citing the “coercive” and “improper” manner they were collected. Many of the Spanish speaking workers are illiterate in English.

Delrahim and his companies’ “misleading conduct has created fear and confusion among its employees,” the judge wrote in an 11-page order, making it less likely they will cooperate with federal authorities.

One female employee, he noted “began to cry” during the interview with Delrahim’s lawyers. Another worker signed “because he felt he would lose his job or have his hours cut if he did not.”

None were given copies of the document they signed, nor were they told they could forfeit back wages by signing, he added.

Olguin ordered Delrahim and Littler Mendelson to send all 700 workers a notice in English and Spanish informing them that the government has determined they are owed back wages, that they can refuse to talk to Delrahim’s lawyers without experiencing retaliation, and that talking to them could limit their ability to collect back wages.

Rather than hold further lengthy hearings on issues of coercion, intimidation and retaliation, Olguin wrote, “the better course is to proceed to a trial on the merits.” A trial date of July 17 has been set.

Ashar, the UC Irvine professor, said Littler Mendelson’s helping to get workers to sign declarations “behind the back” of labor department lawyers “may not be a technical violation of the rules.” However, he added, “it is legally and ethically problematic. They got these workers to undercut their own interests.

“The fact this has been brought to the surface in federal court is a rare thing.”

The dozen car washes cited by the Labor Department include: