"This case is another big spotlight on the great job our CSLEA members do investigating fraud and combating the underground economy which costs the State of California billions of dollars in unpaid taxes." - Alan Barcelona, CSLEA President
LOS ANGELES -- The CEOs of two sewing companies that were subcontracted by True Religion Brand Jeans were arrested April 15, 2015, along with their CPA, on 18 felony counts of workers' compensation insurance fraud totaling more than $11 million dollars in losses.
Sung Hyun Kim, 57, and her sister Caroline Choi, 59, and 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 (CDI) detectives, sisters Kim and Choi, CEOs of Meriko, Inc. and SF Apparel, Inc., allegedly conspired with their CPA to hide tens of millions in payroll to avoid paying workers' compensation insurance premiums. Their underground economy conspiracy led to multi-million dollar premium losses for several workers' compensation insurers including State Fund.
"The underground economy is not a victimless crime," said Insurance Commissioner Dave Jones. "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."
Kim and Choi are accused of fabricating payroll records provided to insurance carrier auditors with the help of CPA Jae Kim. State Fund notified Department of Insurance 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 (EDD). Evidence also revealed many employees were paid under the table through a bank account that was never disclosed to EDD or insurance carriers.
"These cases are often complex and require much work on behalf of CDI detectives," said Alan Barcelona, president of the California Statewide Law Enforcement Association (CSLEA). "These detectives combat the underground economy and every type of insurance fraud you can fathom. They are good at what they do and good at seeing these cases through from beginning to end."
If convicted, Sung Hyun Kim faces 28 years in state prison. Caroline Choi faces 15 years in state prison. Jae Kim faces 22 years in state prison.
This case was a joint effort of the LA County Premium Fraud Task Force including State Fund and EDD.