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CA Department of Insurance

Case Update: Subcontractor of True Religion Brand Jeans allegedly conspired with CPA in multi-million dollar workers’ comp insurance fraud scheme

News: 2017 Press Release

For Release: March 15, 2017
Media Calls Only: 916-492-3566
Case Update - Subcontractors of True Religion Brand Jeans allegedly conspired with CPA in multi-million dollar workers’ comp insurance fraud scheme

Case Update:

Sung Hyun Kim, Caroline Choi and Jae Kim were sentenced yesterday to felony insurance fraud. Sung Kim was sentenced to two years in local custody or electronic monitoring and two years of mandatory supervision, Caroline Choi and Jae Kim were both sentenced to five years felony probation and one year in local custody or electronic monitoring. In December, Sung Hyun Kim and Jae Young Kim each pleaded no contest to two counts of workers' compensation fraud, while Choi entered her plea to two counts of failure to pay state payroll taxes. Restitution to six insurance companies, investigative costs and fines totaling $4.6 million has been paid. The case was prosecuted by the Los Angeles County District Attorney's office.


Original news release below:


LOS ANGELES, Calif. – Sung Hyun Kim, 57, and her sister Caroline Choi, 59, CEOs of sewing companies that were subcontracted by True Religion Brand Jeans were arrested yesterday along with their CPA, Jae Kim, 71, on 18 felony counts of workers' compensation insurance fraud totaling more than $11 million in losses. The three 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, 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."

The alleged fraud was committed by 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.

"Workers' compensation fraud affects everyone and drives up costs in the system," said State Fund Chief of Internal Affairs Dante Robinson. "That's why State Fund actively pursues fraud detection and prosecution.

We commend the Department of Insurance and the other agencies and carriers involved for their diligence in pursuing this significant alleged fraud case."

If convicted, Sung Hyun Kim faces 28 years in state prison and her bail is set at $700,000; Caroline Choi faces 15 years and her bail is set at $430,000; Jae Kim faces 22 years and his bail is set at $520,000. Syung Hyun Kim and Caroline 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.

Media Notes:

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The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $288 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $394 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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