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Suit Charges Garment Shop with Jobless-Insurance Scam

Sacramento Bee
Saturday, May 4, 1985
By Ted Bell

The owners of a Sacramento garment shop were accused Friday of cheating the state out of more than $276,000 by running an unemployment-insurance scam between 1980 and 1983.

The charges came in a civil suit filed by the Sacramento County district attorney's office against the owners of Jane's Garment Shop, 915 T St.

The suite says the owners failed to pay employees regularly and promptly, allowing the workers to falsely claim unemployment benefits while their earnings at the garment shop accumulated.

A Bee investigation of the more than 40 garment industry shops in the city and county earlier this year indicated frequent use of this and other forms of unemployment-insurance fraud.

Friday's action marked the first time the district attorney's office has taken legal action of any kind against the garment shops.

Deputy District Attorney Justin Puerta said his office filed the suit on behalf of the state Employment Development Department. The EDD has prosecuted some garment sweatshops in the bay area on similar charges, but almost all were treated as criminal misdemeanors calling for maximum fines of $1,000.

By filing a civil case, Puerta said Jane's owners could be liable for fines of up to $2,500 a day for each of its approximately 28 employees.

Named in the suit were the "corporate owners" of Jane's Garment Shop, Inc.: Jane N., Hing F., Earnest F. and Dennis F. Louie. Dennis Louie, a lawyer, declined to comment Friday on the allegations. The Louies are represented by former Sacramento County Superior Court Judge Mamoru Sakuma, whose office also declined comment.

"Sweatshop" is a common industry term for small, usually cramped and hidden businesses that are contracted by major, brand-name clothing manufacturers to sew together garments from pre-cut pieces provided by the manufacturers.

In Sacramento, the shops are owned and staffed almost exclusively by Chinese-Americans, Chinese immigrants or ethnic Chinese refugees from Southeast Asia.

Puerta said that it is common for garment industry workers to be paid by the number of items, or "pieces," they sew. He said while federal and state agencies may view the practice as acceptable so long as the payments translate into the federal minimum wage, he does not believe the piecework payments are legal under the state law.

Friday's suit claims that Jane's owners held on to the "tickets" -- which seamstresses collect to provide how many garments they have sewn -- for more than two weeks. The employee thus can claim that she had not been paid and can collect unemployment benefits while she actually is working.

Similarly, unemployment benefits can be increased by falsely reporting the times when the workers was paid.

Although the claim for restitution of $276,213 covers on the years 1980 through 1983, the complaint charges the practice of unemployment-insurance fraud is ongoing.

The complaint also charges Jane's with unfair business competition, the filling of false statements, failure to turn over records for inspection, conspiracy with some employees and violations of withholding provisions.

Puerta said state EDD officials became suspicious of Jane's when examiners noticed that former company employees had collected unemployment benefits of $448,373 more than the company had contributed to the state's insurance fund.

He said EDD investigators "set up surveillance" on Jane's from November 1984 to late January of this year.

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