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Designer jeans subcontracting firms dressed in multimillion comp scheme accusation


The CEOs of two subcontracting firms have been arrested after being accused of an $11 million workers compensation fraud scheme, the California Department of Insurance said Thursday.

Sung Hyun Kim, 57, was CEO and chief financial officer until 2011 for Meriko Inc. in Vernon, California, the insurance department said in a statement. Her 59-year-old sister Caroline Choi is the current CEO and CFO of SF Apparel Inc., also based in Vernon.

The California insurance department alleged Thursday that Ms. Kim and Ms. Choi underreported $78.5 million in payroll from their companies to various workers comp insurers, including the California State Compensation Insurance Fund in Fresno, California, and two insurers owned by Berkshire Hathaway Inc. As a result, the insurance department said Meriko and SF Apparel failed to pay $11 million in comp insurance premiums.

Jae Kim, a certified public accountant working for Ms. Kim and Ms. Choi, also has been implicated in the alleged scam, the insurance department said Thursday. The trio has been accused of a total of 18 counts of workers comp insurance fraud, and arraignments in all three cases are scheduled for Friday.

“The underground economy is not a victimless crime,” insurance Commissioner Dave Jones said in Thursday’s 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 designer brand, Vernon-based True Religion Brand Jeans Apparel Inc. has not been suspected or accused of any wrongdoing in the case, the insurance department said.

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