The state's insurance commission has charged subcontractors of True Religion Brand Jeans with underreporting more than $78 million in payroll to insurers.Officials on April 15 arrested Sung Hyun Kim, 57, and her sister Caroline Choi, 59, heads of garment factories Meriko Inc. and SF Apparel Inc., along with their accountant, Jae Kim, 71. They were charged with 18 felony counts of workers' compensation insurance fraud totaling more than $11 million in losses, according to the California Department of Insurance.
California Department of Insurance detectives said the sisters, whose companies were subcontractors of Vernon-based True Religion, allegedly conspired with their CPA to hide tens of millions in payroll to avoid paying workers' compensation insurance premiums and underreported $78.5 million in payroll to multiple insurers, including the State Compensation Insurance Fund and two insurance companies owned by Berkshire Hathaway.
State Fund officials said they notified the California Department of Insurance after receiving payroll reports that were significantly less than similar reports submitted to the California Employment Development Department. Detectives said they also found evidence of a bank account that was never disclosed to EDD or insurance carriers, which paid several employees under the table.
"The underground economy is not a victimless crime," Insurance Commissioner Dave Jones said in a statement. "By under reporting payroll, paying employees under the table, and committing workers' compensation insurance fraud these employers cheat the system and leave their employees at risk."
If convicted, Sung Hyun Kim faces 28 years and Choi faces 15 years in state prison. Jae Kim faces 22 years in prison if he is convicted.
The Los Angeles County District Attorney's Office is prosecuting the case.