Two Sisters, Sung Hyug Kim and Caroline Sung Choi, Designer Jeans Manufacturing Executives, And Their Accountant, Are Sentenced For Workers' Compensation Fraud In Downtown LA Court
By Lonce LaMon - March 31, 2017
Two sisters, who are associate clothing manufacturing executives, along with their accountant, were sentenced earlier this month in Downtown Los Angeles in a Clara Shortridge Foltz Criminal Justice Center court room for workers’ compensation premium fraud and failure to pay state payroll taxes.
Sung Hyun Kim, 59 years old, and her older sister, Caroline Sung Choi, of 61 years, were corporate officers for Meriki, Inc., and its successor, SF Apparel. These garment manufacturing companies that make high-end brand jeans had been hired as subcontractors to make True Religion brand jeans.
Their accountant, Jae Young Kim, of 73 years, conspired with Sung Hyun Kim to under-report payroll to multiple workers’ compensation carriers. Together they fabricated the payroll records which they submitted to the carrier auditors.
It was State Compensation Insurance Fund that notified the California Department of Insurance detectives when they discovered the payroll reports submitted to them by Sung Hyun Kim’s and Caroline Sung Choi’s companies had markedly less payroll than relative reports submitted to the state of California Employment Development Department (EDD). Evidence later revealed that many employees were paid using another bank account hidden “under the table” without relationship to the records submitted to EDD or the work comp carriers.
Any employer easily knows that the workers’ compensation carrier payroll auditor cross-references the DE-9 and DE-9C forms submitted to the EDD with their own required reports. They ask for the EDD reports at the audit. And they ask for them for a reason—they are going to cross compare them.
Criminal defense attorney Vicki Podberesky is shown here leaving Clara Shortridge Foltz Criminal Justice Center in downtown Los Angeles on July 1st 2016. She represented defendant Caroline Sung Choi who took a plea deal for one year of custody or electronic monitoring with five years of probation. photo by Lonce LaMon; all rights reserved
Thus the CPA accountant, Jae Young Kim, had to know he needed to duplicate the numbers for both the payroll report to the workers’ compensation carrier and the EDD DE-9 and 9C forms if he was going to be any kind of a competent fraudster. Otherwise, he was sending out more than a flagrant red flag; he was sending out a bond fire.
They underreported $78.5 million in payroll to the workers’ compensation carriers than they had reported to the EDD.
But it’s just like insurance fraud expert, Barry Zalma, wrote and published today at the very top of his April 2017 issue of his publication ZIFL (Zalma’s Insurance Fraud Letter).
“Every Insurance Adjuster Must Be Trained About Fraud
In the last 49 years that I have been in the business of insurance, I have learned the one thing that is a certainty: the quality of insurance fraud perpetrators is almost non-existent. That means that it is so easy to steal from insurance companies that amateurs with no skills are jumping into the business of defrauding insurers. If the insurance industry learns enough about insurance fraud and defeats the claims of the amateurs, the professional fraud perpetrators will go away and work easier crimes.”
In other words, Barry is saying that the quality of fraudsters’ work product is abysmally low. So, in this case, for CPA Jae Young Kim and executive Sung Hyun Kim not to send the same numbers to both EDD and the workers’ comp carriers is simply a four letter word: DUMB.
Veteran lawyer and insurance fraud expert Barry Zalma, above, is a consultant and the publisher of Zalma's Insurance Fraud Letter (ZIFL). www.zalma.com.
In December 2016, the defendants pleaded “no contest”. In criminal cases, “no contest” is treated as a guilty plea. Sung Hyun Kim pleaded no contest to two counts of workers’ compensation fraud. Jae Young Kim also pleaded no contest to two counts of workers’ compensation fraud. Caroline Sung Choi entered her plea to two counts of failure to pay state payroll taxes.
Sung Hyun Kim was sentenced to two years in local custody or else electronic monitoring with two years of mandatory supervision. Jae Young Kim was sentenced to one year in custody or electronic monitoring with probation for five years. Caroline Sung Choi received the same sentence as Jae Young Kim. These sentencings took place in court on March 14th 2017.
They were originally charged with 18 felony counts of workers’ compensation insurance fraud totaling more than $11 million in losses.
It was in 2006 that Sung Hyun Kim and CPA Jae Young Kim began underreporting payroll to the work comp insurance carriers. Losses were estimated to be approximately $3.8 million. Restitution, investigative costs, and fines totaling $4.6 million have been paid.
The underreporting allegedly cost the State Compensation Insurance Fund $1.5 million. Six other insurance companies received a combined $1.89 million in restitution:
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Tower Insurance (now CastlePoint National Insurance Company): $274,154.07
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Star Insurance Company: $132,366.
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Granite State Insurance Company: $342,247.
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Cypress Insurance Company: $98,815.
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Insurance Company of the West (ICW Group): $132,395.
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National Liability and Fire Insurance Company: $917,535.
Barry Zalma, also in his April 2017 issue of ZIFL just distributed today, mused that one can only wonder why the punishment is so mild for such a major crime as occurred in this case. “True Religion and its insurers needed some fire and brimstone instead of (just) restitution of less than half that was stolen and home confinement instead of prison,” he wrote.
In response to Barry, this writer has observed that if sufficient restitution is paid before the sentencing hearing, usually the defendant is exonerated from prison time and allowed to serve some type of community service concomitant with probation. Trudy Maurer, the CEO of Implantium, paid all her restitution to her claims payers before her sentencing date of February 18th 2016 at San Diego Superior Court. Her restitution was $84,894.00.
Trudy got three years of felony probation. Her 25 hours of community service had already been completed before her sentencing hearing. She had once before in the Bay Area been charged with the same issue of egregious overbilling for spinal hardware to workers’ compensation patients.
This case of the sister clothing manufacturing executives and their accountant was prosecuted by Deputy District Attorney Theresa Mitchell of the Healthcare Fraud Division of the Los Angeles District Attorneys’ office. Defense attorney Vicki Podberesky represented Caroline Sung Choi. Vicki also currently represents defendant Maria Turley, the wife of defendant Paul Turley, in the Criminal Organization Munir Uwaydah case being prosecuted presently by the Los Angeles District Attorney also for workers’ compensation fraud in the same courthouse.
lonce@adjustercom.com
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