LOS ANGELES (CBSLA.com) — Detectives Thursday announced the arrest of three people who are suspected of underreporting more than $78 million in payroll to multiple insurers.

Sisters Sung Hyun Kim, 57, and Caroline Choi, 59, — CEOs of Meriko, Inc., and SF Apparel, Inc. who were subcontracted by True Religion Brand Jeans — along with their CPA, Jae Kim, 71, were arrested Wednesday on 18 felony counts of workers’ compensation insurance fraud, which totaled more than $11 million in losses, according to the California Department of Insurance.

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(credit: CA Department of Insurance)

(credit: CA Department of Insurance)

(credit: CA Department of Insurance)

(credit: CA Department of Insurance)

Detectives explained Hyun Kim, Choi and Jae Kim allegedly conspired to hide $78.5 million in payroll to avoid paying workers’ compensation insurance premiums to two insurance companies owned by Berkshire Hathaway, and the State Compensation Insurance Fund.

“The underground economy is not a victimless crime,” said Insurance Commissioner Dave Jones. “By under reporting payroll, paying employees under the table, and committing workers’ compensation insurance fraud these employers cheat the system and leave their employees at risk.”

According to detectives, Jae Kim allegedly helped Hyun Kim and Choi fabricate payroll records that were provided to insurance carrier auditors.

State Fund officials explained they notified the California Department of Insurance after they received payroll reports that were significantly less than similar reports submitted to the California Employment Development Department.

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“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.”

Detectives explained evidence also revealed a bank account that was never disclosed to insurance carriers or the EDD, which funded several employees under the table.

Hyun Kim, on $700,000, and Choi, on $430,000, were subsequently booked into the Los Angeles County Jail.

If convicted, Hyun Kim faces 28 years, and Choi faces 15 years in state prison.

Jae Kim is being held on $520,000 at the Men’s Central Jail. He faces 22 years in prison if he is convicted.

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The Los Angeles County District Attorney’s Office is prosecuting this case.