Myrtle Beach area nail salon workers implicated in illegal immigration, human trafficking investigation
By David Wren -
Saturday, Jan. 14, 2012

Nearly two dozen Myrtle Beach area nail salon employees have been implicated in a statewide probe into illegal immigration and human trafficking based on fraudulently obtained professional licenses, and the director of the S.C. Department of Labor, Licensing and Regulation says her staff has been hampered in efforts to crack down on the scheme.

The Myrtle Beach area employees – who have licenses as estheticians and nail technicians – are among nearly 300 former students of the World Beauty School in Greenville, which was shut down in 2009 after state officials learned it was providing educational certifications for students who never attended classes and never took the state licensing exams.

The names of the students are included in an LLR document titled “Beauty World School In Question.” The Sun News is not naming the students who have active licenses because they have not been charged with any civil or criminal action. Investigations into the fraudulent licenses continue and many of the licensees continue to work as nail technicians, LLR records show.

World Beauty School had been conspiring with a now-fired LLR employee, who used the falsified information to create several hundred professional licenses for the students, according to agency documents. That employee also created fake education and testing scores for licensees and altered information on existing licenses so they could be reprinted and given to unqualified persons.

That employee was arrested on three counts of forgery in May 2010 but the charges were dropped last year when she entered into a pre-trial intervention program, according to the clerk of court in Lexington County.

LLR Director Catherine Templeton – who joined the agency in January 2011, after the licensing issues had occurred – told The Sun News last week that the document scheme might be helping illegal immigrants obtain work and “may have ties to human trafficking, prostitution and drugs” as part of a larger organized crime network.

Templeton said the fraudulent licenses “legitimizes them [employees] and allows them to work out in the open,” she said.

All but two of the 22 World Beauty School students with Myrtle Beach area addresses still have active licenses, according to LLR’s database.

The scandal goes beyond fraudulent licenses, Templeton said, with some LLR employees facilitating the illegal activities.

Until recently, Templeton said, some LLR cosmetology inspectors accepted cash payments from nail salon employees in return for overlooking violations, thus allowing the illegal work to continue. Also, Templeton said a supervisor in the agency’s cosmetology division knew about the fraud but did not do anything to stop it. That supervisor has since retired.

Such problems are nationwide: Ohio officials, for example, are investigating possibly thousands of cases of fraudulent nail salon licenses issued in that state and Martina Vandenberg – counsel for The Freedom Network USA, a coalition of nonprofit agencies advocating against human trafficking – said during a congressional hearing in November that “nail salons all up and down the Eastern Seaboard” have harbored illegal immigrants as part of a human trafficking network.

And Boston public radio station WGBH reported in July 2010 that “in York, Pa.; East Orange, N.J.; Salem, Va. and just outside of San Jose, Calif., over the past year, police have discovered women who have been virtually enslaved in nail salons. Some for sex. Others exclusively for labor.”

Templeton said her office has been working with the FBI and the State Law Enforcement Division to track down fraudulent licenses and possible criminal violations.

Beth Drake, a spokeswoman with the U.S. Attorney’s Office in Columbia, said she cannot say whether a federal investigation is taking place. Templeton, however, said the FBI has interviewed her staff and requested documents. A SLED spokeswoman did not respond to a request for comments.

Cleaning up the problem Templeton inherited hasn’t been easy, she said. The seemingly simplest route – canceling all of the licenses obtained by World Beauty School students unless they can prove their credentials are legitimate – is not an option. That is because the state’s Administrative Law Court ruled in April that the burden of proving whether fraud did or did not occur lies with the agency, not with the students.

“As long as the possibility is out there that somebody went to that school and attended the classes and met the requirements, we can’t go whole cloth and get rid of those licenses,” Templeton said, adding that anecdotal evidence shows only a handful of the school’s students legitimately earned their certifications.

“Cleaning up the World Beauty School mess is a slow and arduous process,” Templeton said.

Massive errors

Templeton said the agency started its World Beauty School investigation in late 2008, but it wasn’t until more than a year later that LLR realized how widespread problems within its cosmetology licensing department had become.

In early 2010, a man visited the agency seeking to have his license renewed. The man was supposed to disclose the school he attended on the renewal application, but he claimed he could not remember the name of the school. He wanted an agency employee to tell him the name of the school listed on his initial application.

That inquiry led to the discovery that an LLR employee had been falsifying cosmetology licenses. SLED became involved in the investigation at that point and LLR employees began scrutinizing hundreds of licenses to see if they could detect more fraudulent documents.

“There was so much duplication that we knew something had to be wrong,” Templeton said. “For example, we might have 14 licenses issued to the same name.”

There were other problems: LLR paperwork showed different dates of birth for the same individual on different applications; different addresses were used for the same name on separate applications submitted during the same time period; the same handwriting was on documents purportedly submitted by different people; and some addresses applicants gave as their homes turned out to belong to unrelated businesses.

“There was a Wal-mart that didn’t even have a nail salon,” Templeton said. “Another person gave us the address for a Little Caesar’s Pizza.”

The discovery that World Beauty School had inside help at the state agency came more than a year after the school had agreed to relinquish its license in February 2009. School owner David Nguyen did not admit to any wrongdoing in that agreement.

Dorothy Ricks, a former instructor at agreed to permanently relinquish her instructor’s license in March 2009, signing an order in which she “admits that on numerous occasions she signed and submitted fraudulent student attendance records, transcripts and affidavits indicating that her students had attended class when they had not.”

Although she is not allowed to teach, Ricks still has an active cosmetology license that allows her to work in the profession. She did not respond to a request for comments last week.

The full extent of the fraudulent licenses – and the culpability of LLR’s employees in the scheme – did not become evident until July 2010, when a Columbia nail spa employee visited the agency to complain about bribes his boss was giving to LLR inspectors.

“A gentleman came in and reported that his boss was paying off our inspectors and was involved in employing unlicensed individuals, some of whom were illegal aliens,” said LLR spokeswoman Lesia Kudelka. The informant told agency officials that he feared for his life because the spa’s owners were involved in a human trafficking network. It was at that point that the FBI got involved.

Templeton said the agency’s initial effort to weed out phony licensees was to force any World Beauty School student whose license was up for renewal to prove during a cosmetology board hearing that his or her credentials were valid.

Two Myrtle Beach area nail technicians – Hieu Chi Du and Khang Van Huynh – did not show up for their renewal hearings in 2010 and their licenses were not renewed. Neither person has appealed the board’s decision.

However, a group of 79 other World Beauty School alumni appealed the agency’s ruling that they must prove their credentials are valid. Administrative Law Court Judge Anthony Goldman sided with the former students last year, saying LLR’s hearing procedure violated due process and that the burden of proof lies with the cosmetology board when it comes to denying license renewals.

That meant LLR had to renew any license that it could not prove was obtained fraudulently. In the Myrtle Beach area, 20 former World Beauty School students had their licenses renewed last year – with their new expiration dates set for March 2013.

Templeton said proving fraud has been difficult because much of the documentation from World Beauty School and paperwork that applicants initially used to get their licenses now is missing or never existed.

“We can’t find a lot of the paperwork,” she said. “LLR didn’t keep all the applications.”

New, stricter measures

During a meeting last month of the state Senate’s Labor, Commerce and Industry subcommittee, Templeton outlined several steps her agency is taking to help find many of the current fraudulent license holders.

LLR is paying $5,000 to the National Interstate Council of State Boards of Cosmetology – the group that administers the cosmetology exams – to double-check the names of World Beauty School students to ensure that they took the exam and then review all of the tests that were taken to see if there are any patterns that might indicate fraud.

LLR also has a full-time investigator who handles nothing but cosmetology fraud cases.

The agency has started to use tamper-proof security paper to print licenses and is limiting employee access to that paper. LLR also is implementing a tracking system to account for each license ordered by the department.

Templeton also is addressing accountability issues within the cosmetology department’s inspectors division. Supervisors now create schedules for inspectors that are given out only days before inspections are to be conducted, providing less opportunity for an inspector to tip off a nail salon about an impending visit. In addition, GPS trackers have been installed in all state vehicles assigned to inspectors and the data is cross-referenced by supervisors with that inspector’s electronic calendar.

Inspectors no longer collect money from licensees for the payment of citations and the agency has implemented an electronic inspection report that must be completed in the field and is immediately reviewable by supervisors.

Templeton said she would like to get law enforcement to check Social Security numbers provided by license applicants against a national database to weed out duplicates and false numbers.

“We don’t have that clearance or authority now, but it would take another bite of the apple if we could eliminate some fraudulent licenses that way,” she said. “We’re working on filling as many holes as possible, but we also can’t trample on the rights of someone who might have gone through the process legitimately.”

Those efforts are taking place even as the state legislature is considering deregulating some aspects of LLR, an umbrella agency for more than 40 boards and commissions that regulate professions such as auctioneers, real estate agents, massage therapists and pharmacists. Cosmetology is among the divisions that the legislature is considering for deregulation.

Templeton, an advocate for deregulation of the industry, said the current cosmetology rules “are more restrictive than necessary to protect the health, safety or welfare of the public.”

In a report issued this month, LLR stated that only 5 percent of the cosmetology division’s 4,626 inspections last year resulted in citations, and only 1 percent related to health concerns.

“Weighing the relatively low risk of harm – and even lower likelihood of prevention by the state – against the high cost of the program begs the question of whether state regulation of cosmetology and barbers is a wise investment for taxpayers,” the report states.

Those within the industry, however, are opposed to any deregulation, according to Kenneth Shuler, founder and president of the Kenneth Shuler School of Cosmetology chain. Shuler said LLR’s claims that deregulation will save taxpayer dollars is bogus because licenses bring in $1.7 million per year and it only costs $300,000 to run the division.

“The rest of that money goes to the state treasury,” said Shuler, who started 53 years ago as a barber at Enoch’s barber shop in Myrtle Beach and now employs 250 people at seven schools and 10 hair salons statewide.

Shuler said battling problems like the World Beauty School situation is one reason regulation of the industry is needed.

“The general public should feel a certain level of comfort knowing that the person working at a hair salon or nail salon is trained properly and that there is proper sanitation,” Shuler said, adding that a state-mandated licensing procedure provides that assurance for consumers. “People in our industry are more than happy to pay to protect the industry from every Tom, Dick and Harry that might want to set up a shop.”

Templeton, however, said she believes nail spa consumers have not been harmed by the fraudulent licenses, but that they represent a larger, more complicated legal issue.

“It’s an immigration issue and a professional issue,” Templeton said, adding that legitimate job seekers can’t find work because “someone who does not have a legitimate license and didn’t bother to spend $2,000 on training – and might not even be here legally – is taking that work.

“It’s taking jobs away from our residents,” she said.
Contact DAVID WREN at 626-0281.

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