The owners of sewing companies subcontracted by True Religion Brand Jeans were arrested this week on 18 felony counts of workers’ compensation insurance fraud totaling more than $11 million in losses.
Businesses Sung Hyun Kim, 57, and her sister Caroline Choi, 59, CEOs of Meriko Inc. and SF Apparel Inc., along with their CPA, Jae Kim, 71, allegedly conspired to underreport $78.5 million in payroll to multiple insurers including the State Compensation Insurance Fund and two insurance companies owned by Berkshire Hathaway.
According to California Department of Insurance detectives, sisters Kim and Choi, conspired with their CPA to hide tens-of-millions of dollars in payroll to avoid paying workers’ comp insurance premiums in an “underground economy conspiracy” that led to multi-million dollar premium losses for several workers’ comp insurers.
“The underground economy is not a victimless crime,” California Insurance Commissioner Dave Jones said in a statement. “By underreporting payroll, paying employees under the table and committing workers’ compensation insurance fraud, these employers cheat the system and leave their employees at risk.”
The alleged fraud was committed by fabricating payroll records provided to insurance carrier auditors with the help of CPA Jae Kim. State Fund reportedly notified CDI detectives when they discovered payroll reports submitted to them by the companies showed significantly less total payroll than similar reports submitted to the California Employment Development Department.
Evidence also revealed many employees were paid under the table through a bank account that was never disclosed to EDD or insurance carriers, the investigation showed.
If convicted, Kim faces 28 years in state prison. Her bail was set at $700,000. Choi faces 15 years and her bail was set at $430,000, and Jae Kim faces 22 years and his bail was set at $520,000.
Kim and Choi were booked into the Los Angeles County Jail, and Jae Kim was booked into the Men’s Central Jail in Los Angeles. The Los Angeles County District Attorney’s Office is prosecuting this case.
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