The California Insurance Commissioner announced Thursday that two subcontractors working with Vernon denim company True Religion Apparel Inc. and their accountant had been arrested and charged on 18 felony charges. The three are accused of having engaged in a conspiracy to conceal hundreds of employees and $78.5 million in payroll to avoid paying workers’ compensation premiums and payroll taxes.

Sung Hyun Kim, 57, and Caroline Choi, 59, chief executives of separate sewing companies that were subcontracted by True Religion, and their CPA, 71-year-old Jae Kim, were arrested Wednesday as part of an alleged fraud responsible for more than $11 million in losses.

The three are accused of underreporting their payroll through fraudulent records and paying some employees through a secret bank account that was hidden from their insurance carriers and state agencies. If convicted, the three face sentences ranging from 15 to 28 years.

“The underground economy is not a victimless crime,” Insurance Commissioner Dave Jones said at a press conference announcing the arrests. “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.”

True Religion could not be reached for comment on this story.

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