News

Inmates file fraudulent unemployment claims estimated to cost state $1B

San Mateo County prosecutors charge 22 people with fraud of up to $450K

An inmate walks past three-tier bunks at the Women's Correctional Facility in Redwood City on Sept. 18, 2012. Embarcadero Media file photo by Michelle Le.

California officials estimate that jail and prison inmates could have filed close to $1 billion in fraudulent claims for pandemic unemployment assistance.

During a news conference on Tuesday, district attorneys of Sacramento, El Dorado, Kern and San Mateo counties described widespread unemployment fraud among inmates of California Department of Corrections and Rehabilitation (CDCR) facilities in their counties.

A collaborative investigation between a statewide task force, the CDCR and the district attorneys' offices found that inmates filed 35,003 fraudulent claims through the state's Employment Development Department (EDD), which received federal funding to assist people unemployed due to the pandemic.

Of the claims filed, over 20,000 have already been paid, amounting to over $140 million in fraudulent payments for claims filed March through August. The highest single claim was $48,600. Officials are still investigating the fraud cases in each county, and expect that total losses could reach hundreds of millions, or near $1 billion, an amount that cannot be easily reclaimed.

"It is perhaps, and will be, one of the biggest frauds of taxpayer dollars in California history," Sacramento County District Attorney Anne Marie Schubert said at the conference, which took place in Sacramento and was livestreamed on Facebook.

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Many officials became aware of the unemployment fraud in September. Since then, local, state and federal prosecutors — including the U.S. Attorney's Office — formed a statewide task force to investigate the issue. The investigation involved crossmatching a list of the inmate population with people who filed for unemployment through the EDD, thus revealing the large-scale fraud.

"It exists in every CDCR prison. It encompasses every type of inmate. It encompasses death row inmates," Schubert said. "It encompasses inmates who have served or are serving life or life without the possibility of parole, clearly individuals that are not entitled to these benefits that are so desperately needed by working families in this state that have been adversely affected by this pandemic."

Those filing claims and receiving illegal benefits include some high-profile inmates, such as Scott Peterson, who was convicted of first-degree murder in 2004.

Of the 700 plus inmates on death row in California, 133 inmates have been named in fraudulent claims, and they have been paid over $400,000 through August.

In San Mateo County, 22 people — 16 inmates and six people outside the prison system — have been charged with fraud. The fraudulent payments account for between $250,000 and $400,000, according to San Mateo County District Attorney Steve Wagstaffe. Thus far, San Mateo County investigators have recovered $150,000.

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In Kern County — where there are five state prisons, the most of any California county — about 4,000 applications for benefits have been made in the name of inmates, according to Kern County District Attorney Cynthia Zimmer. Of those applications, over 2,000 inmates have received illegal benefits, amounting to over $16 million.

Officials said it was a simple fraud for inmates to carry out, as they could easily apply for benefits online with basic identifying information. They used their own names, fake names or names of other inmates to apply. In some cases, they used fake Social Security numbers, o enlisted the help of people outside of prison who filed fraudulent claims on their behalf.

A total of 133 death row inmates named in fraudulent claims have been paid over $400,000 through August, according to a statewide investigation. Courtesy Getty Images.

Individuals then received EDD debit cards which they used to retrieve cash at ATMs without identification.

Unlike some 35 other states, California does not use a crossmatching system to check jail and prison populations against people filing for unemployment claims.

"This was a simple fraud to perpetrate but it's a difficult crime to unwind given the magnitude of the number of people — thousands of inmates in state, local and federal institutions applying for it," said El Dorado County District Attorney Vern Pierson.

Pierson, who also serves as president of the California District Attorneys Association, said that several years ago the association met with the then-director of the EDD to inquire about a crossmatching system. They were told the tools for such crossmatching existed but had not been used.

A spokesperson from the EDD said in an email on Tuesday that the agency is now working with the U.S. Department of Labor, Office of Inspector General on crossmatching inmates with suspect claims.

"We're also pursuing how to integrate such crossmatches moving forward as part of enhanced prevention efforts during this unprecedented time of pandemic-related unemployment fraud across the country. In addition, EDD is working collaboratively with state cyber-security experts," said the email response, courtesy of EDD Deputy Director of Public Affairs Loree Levy.

'It is perhaps, and will be, one of the biggest frauds of taxpayer dollars in California history.'

-Anne Marie Schubert, district attorney, Sacramento County

In early fall of this year, the EDD also introduced an identification verification system that required applicants to upload identifying documents and their photo of themselves for validation.

However, inmates have been able to circumvent that process by requesting help from people outside of the prison system.

"We know that they (inmates) are talking amongst themselves about how easy it is to defeat that and how to do a workaround, " Pierson said. "They will call to somebody on the outside, get a driver's license, get some other type of identification, and then the money continues to flow."

Pierson said the identification verification is an improvement, but "not an overall fix to the problem."

Wagstaffe, San Mateo County's district attorney, said that the EDD cooperated with their local investigation over the summer, but they were told the fraudulent payments could not stop until charges were officially filed in court.

This led Wagstaffe's office to accelerate charges.

"Once we got the investigation done, we were able to do the charging within just a few days," Wagstaffe said in an interview Tuesday. "Whereas normally when you have time you might get to it over the course of weeks."

In San Mateo County, of the 22 people charged, one is out on bail, and six people have been convicted so far. Others are awaiting a trial date.

Under California law, there is a three-year maximum sentence for crimes of conspiracy, according to Wagstaffe. For current inmates, the years were added to their current sentence. There were also cases — outside of San Mateo County — where inmates used other people's identities to file claims, which counts as a separate charge of identity theft and comes with its own sentence.

In addition, Wagstaffe said those convicted were ordered to pay restitution around $25,000, which will be collected out of their earnings.

Wagstaffe said that San Mateo County's numbers are relatively small — accounting for only 16 fraudulent claims out of the thousands of claims statewide. He expressed concern for counties where there are even more cases to investigate.

Pierson, El Dorado County's district attorney, said that despite their efforts, "the vast majority of the money will never be paid" as there's "no practical way" for criminals facing long sentences to ever repay the money.

A group of district attorneys wrote to Gov. Gavin Newsom on Monday, requesting his personal involvement to help stem the fraud.

They requested that Newsom add resources and investigative staff to the task force and employ a crossmatch system.

The letter was signed by district attorneys of Sacramento, El Dorado, Lassen, Fresno, Monterey, Marin, Riverside, San Diego and Ventura counties.

"It's not just about the money that's been stolen. It's about the fact that we need to turn off the spigot, which means that we should not continue to pay these convicted felons who are in prison," Schubert, Sacramento's district attorney, said. "If we have that spigot shut off, we are going to reduce the amount of money that's flowing to these individuals."

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Inmates file fraudulent unemployment claims estimated to cost state $1B

San Mateo County prosecutors charge 22 people with fraud of up to $450K

by /

Uploaded: Wed, Nov 25, 2020, 9:08 am

California officials estimate that jail and prison inmates could have filed close to $1 billion in fraudulent claims for pandemic unemployment assistance.

During a news conference on Tuesday, district attorneys of Sacramento, El Dorado, Kern and San Mateo counties described widespread unemployment fraud among inmates of California Department of Corrections and Rehabilitation (CDCR) facilities in their counties.

A collaborative investigation between a statewide task force, the CDCR and the district attorneys' offices found that inmates filed 35,003 fraudulent claims through the state's Employment Development Department (EDD), which received federal funding to assist people unemployed due to the pandemic.

Of the claims filed, over 20,000 have already been paid, amounting to over $140 million in fraudulent payments for claims filed March through August. The highest single claim was $48,600. Officials are still investigating the fraud cases in each county, and expect that total losses could reach hundreds of millions, or near $1 billion, an amount that cannot be easily reclaimed.

"It is perhaps, and will be, one of the biggest frauds of taxpayer dollars in California history," Sacramento County District Attorney Anne Marie Schubert said at the conference, which took place in Sacramento and was livestreamed on Facebook.

Many officials became aware of the unemployment fraud in September. Since then, local, state and federal prosecutors — including the U.S. Attorney's Office — formed a statewide task force to investigate the issue. The investigation involved crossmatching a list of the inmate population with people who filed for unemployment through the EDD, thus revealing the large-scale fraud.

"It exists in every CDCR prison. It encompasses every type of inmate. It encompasses death row inmates," Schubert said. "It encompasses inmates who have served or are serving life or life without the possibility of parole, clearly individuals that are not entitled to these benefits that are so desperately needed by working families in this state that have been adversely affected by this pandemic."

Those filing claims and receiving illegal benefits include some high-profile inmates, such as Scott Peterson, who was convicted of first-degree murder in 2004.

Of the 700 plus inmates on death row in California, 133 inmates have been named in fraudulent claims, and they have been paid over $400,000 through August.

In San Mateo County, 22 people — 16 inmates and six people outside the prison system — have been charged with fraud. The fraudulent payments account for between $250,000 and $400,000, according to San Mateo County District Attorney Steve Wagstaffe. Thus far, San Mateo County investigators have recovered $150,000.

In Kern County — where there are five state prisons, the most of any California county — about 4,000 applications for benefits have been made in the name of inmates, according to Kern County District Attorney Cynthia Zimmer. Of those applications, over 2,000 inmates have received illegal benefits, amounting to over $16 million.

Officials said it was a simple fraud for inmates to carry out, as they could easily apply for benefits online with basic identifying information. They used their own names, fake names or names of other inmates to apply. In some cases, they used fake Social Security numbers, o enlisted the help of people outside of prison who filed fraudulent claims on their behalf.

Individuals then received EDD debit cards which they used to retrieve cash at ATMs without identification.

Unlike some 35 other states, California does not use a crossmatching system to check jail and prison populations against people filing for unemployment claims.

"This was a simple fraud to perpetrate but it's a difficult crime to unwind given the magnitude of the number of people — thousands of inmates in state, local and federal institutions applying for it," said El Dorado County District Attorney Vern Pierson.

Pierson, who also serves as president of the California District Attorneys Association, said that several years ago the association met with the then-director of the EDD to inquire about a crossmatching system. They were told the tools for such crossmatching existed but had not been used.

A spokesperson from the EDD said in an email on Tuesday that the agency is now working with the U.S. Department of Labor, Office of Inspector General on crossmatching inmates with suspect claims.

"We're also pursuing how to integrate such crossmatches moving forward as part of enhanced prevention efforts during this unprecedented time of pandemic-related unemployment fraud across the country. In addition, EDD is working collaboratively with state cyber-security experts," said the email response, courtesy of EDD Deputy Director of Public Affairs Loree Levy.

In early fall of this year, the EDD also introduced an identification verification system that required applicants to upload identifying documents and their photo of themselves for validation.

However, inmates have been able to circumvent that process by requesting help from people outside of the prison system.

"We know that they (inmates) are talking amongst themselves about how easy it is to defeat that and how to do a workaround, " Pierson said. "They will call to somebody on the outside, get a driver's license, get some other type of identification, and then the money continues to flow."

Pierson said the identification verification is an improvement, but "not an overall fix to the problem."

Wagstaffe, San Mateo County's district attorney, said that the EDD cooperated with their local investigation over the summer, but they were told the fraudulent payments could not stop until charges were officially filed in court.

This led Wagstaffe's office to accelerate charges.

"Once we got the investigation done, we were able to do the charging within just a few days," Wagstaffe said in an interview Tuesday. "Whereas normally when you have time you might get to it over the course of weeks."

In San Mateo County, of the 22 people charged, one is out on bail, and six people have been convicted so far. Others are awaiting a trial date.

Under California law, there is a three-year maximum sentence for crimes of conspiracy, according to Wagstaffe. For current inmates, the years were added to their current sentence. There were also cases — outside of San Mateo County — where inmates used other people's identities to file claims, which counts as a separate charge of identity theft and comes with its own sentence.

In addition, Wagstaffe said those convicted were ordered to pay restitution around $25,000, which will be collected out of their earnings.

Wagstaffe said that San Mateo County's numbers are relatively small — accounting for only 16 fraudulent claims out of the thousands of claims statewide. He expressed concern for counties where there are even more cases to investigate.

Pierson, El Dorado County's district attorney, said that despite their efforts, "the vast majority of the money will never be paid" as there's "no practical way" for criminals facing long sentences to ever repay the money.

A group of district attorneys wrote to Gov. Gavin Newsom on Monday, requesting his personal involvement to help stem the fraud.

They requested that Newsom add resources and investigative staff to the task force and employ a crossmatch system.

The letter was signed by district attorneys of Sacramento, El Dorado, Lassen, Fresno, Monterey, Marin, Riverside, San Diego and Ventura counties.

"It's not just about the money that's been stolen. It's about the fact that we need to turn off the spigot, which means that we should not continue to pay these convicted felons who are in prison," Schubert, Sacramento's district attorney, said. "If we have that spigot shut off, we are going to reduce the amount of money that's flowing to these individuals."

Comments

Jennifer
Registered user
another community
on Nov 25, 2020 at 9:55 am
Jennifer, another community
Registered user
on Nov 25, 2020 at 9:55 am
54 people like this

This makes my blood boil. All the hardworking people who are struggling, and murderers, rapists, etc. are getting away with unemployment fraud. How did they get away with it using their own names? They haven't worked in years, and to collect unemployment you have to have wages. And, yes -- there should be crosschecking. This was preventable.


Lee Forrest
Registered user
Crescent Park
on Nov 25, 2020 at 10:28 am
Lee Forrest, Crescent Park
Registered user
on Nov 25, 2020 at 10:28 am
36 people like this

>"They haven't worked in years, and to collect unemployment you have to have wages."

^ Do minimal prison wages (i.e. for working in kitchen/laundry services, making license plates etc. ) qualify for EDD benefits in the event of a lay-off or reduced work hours due to the pandemic?


taxpayer
Registered user
Another Palo Alto neighborhood
on Nov 25, 2020 at 9:26 pm
taxpayer, Another Palo Alto neighborhood
Registered user
on Nov 25, 2020 at 9:26 pm
5 people like this

Inmates filed 35,003 fraudulent claims through the EDD? Article says Scott Peterson was one of them. Where can I find a listing of the other 35,002 names?


Lee Forrest
Registered user
Crescent Park
on Nov 26, 2020 at 8:14 am
Lee Forrest, Crescent Park
Registered user
on Nov 26, 2020 at 8:14 am
37 people like this

>"Inmates filed 35,003 fraudulent claims through the EDD?"

^ Curious...how do the inmates who filed for EDD benefits go about cashing their unemployment checks & where can they go shopping outside of a prison commissary?


Squidsie
Registered user
another community
on Nov 26, 2020 at 8:35 pm
Squidsie, another community
Registered user
on Nov 26, 2020 at 8:35 pm
7 people like this

Question: Why aren't applicants cross-checked against IRS records to make sure that they have actually been employed and earning money? It would be pretty easy to verify income and address in just a moment.


Anonymous
Registered user
Duveneck/St. Francis
on Nov 26, 2020 at 10:18 pm
Anonymous, Duveneck/St. Francis
Registered user
on Nov 26, 2020 at 10:18 pm
7 people like this

This is infuriating, not publicized as much as it ought to be to busy and distracted taxpayers. Hard to believe how incompetent many CA politicians and bureaucrats are, though I admit I actually had a reasonable experience with CA DMV when I got my Real ID.
But really, from the condescending hypocrite Governor Newsom to the staggering waste of taxpayer dollars, we need audits, streamlining and tightening of CA government ops...I’m not too hopeful...look at State Senator Scott Weiner’s constant outrageous bills. No wonder so many are leaving this state. VERY close to killing the golden goose of Silicon Valley.


Lee Forrest
Registered user
Crescent Park
on Nov 27, 2020 at 7:40 am
Lee Forrest, Crescent Park
Registered user
on Nov 27, 2020 at 7:40 am
23 people like this

>"...from the condescending hypocrite Governor Newsom to the staggering waste of taxpayer dollars,"

^ Add 'always smiling' to Governor Newsom's description as well.

No worries on his part, just more statewide proclamations for the public good...along with personal & private exemptions for himself & associates (including family).


Jennifer
Registered user
another community
on Nov 27, 2020 at 9:32 am
Jennifer, another community
Registered user
on Nov 27, 2020 at 9:32 am
2 people like this

Where do inmates cash their checks? EDD cards were sent to friends/family members, and cash was withdrawn from ATMs. Money sent from EDD should be checks only, and ID should be required to cash them.

I'll never understand how honest people are not having their EDD claims approved, and the state is easily sending money to criminals.


Lee Forrest
Registered user
Crescent Park
on Nov 27, 2020 at 10:56 am
Lee Forrest, Crescent Park
Registered user
on Nov 27, 2020 at 10:56 am
33 people like this

>"EDD cards were sent to friends/family members, and cash was withdrawn from ATMs. Money sent from EDD should be checks only, and ID should be required to cash them."

^ Concurring...blame the pandemic & ease of access protocols enacted by CA EDD bureaucrats who did not scrutinize the recipients.

>"I'll never understand how honest people are not having their EDD claims approved, and the state is easily sending money to criminals."

^ And many legitimate recipients are still waiting to have their claims processed...in many ways, this lack of oversight on the part of the CA EDD is contributing to further criminal activity.

Then again & given the outcome, most of these bureaucrats & office workers could probably care less...as long as they keep the paperwork moving & are ensured of their retirement benefits.

>"Only in CA - the degree of incompetence is breath taking."

^ That goes without saying.


Resident 1-Adobe Meadows
Registered user
Adobe-Meadow
on Nov 27, 2020 at 10:57 am
Resident 1-Adobe Meadows, Adobe-Meadow
Registered user
on Nov 27, 2020 at 10:57 am
4 people like this

Only in CA - the degree of incompetence is breath taking. What CA employee signed off on this? A relative of one of the prisoners? We need names of the people that allowed this to happen. They need to go to jail.


Resident 1-Adobe Meadows
Registered user
Adobe-Meadow
on Nov 28, 2020 at 8:22 am
Resident 1-Adobe Meadows, Adobe-Meadow
Registered user
on Nov 28, 2020 at 8:22 am
6 people like this

The write-up in the papers today on this issue is staggering. This state sets up organizations that are funded by taxpayer dollars to help people and what happens is- giant rip-offs. And the rip-offs just keep expanding from topic to topic. One rip-off after another. Include Caltrans which takes home for highways that never get built - empty homes sitting there. Valuable farmland for the HSR that is taken by eminent domain - now just sitting there. If nothing else we need to be very vigilant now on how our taxpayer dollars are spent and by who. Letting organizations that are set up to correct problems are out of control. That includes ABAG who needs a through audit.


Lee Forrest
Registered user
Crescent Park
on Nov 30, 2020 at 11:03 am
Lee Forrest, Crescent Park
Registered user
on Nov 30, 2020 at 11:03 am
16 people like this

> "Why aren't applicants cross-checked against IRS records to make sure that they have actually been employed and earning money? It would be pretty easy to verify income and address in just a moment."

^ One would think that verifying the actual address of a state prison inmate shouldn't pose a serious obstacle for an EDD case worker. Then again...

And as far as cross-referencing their earnings in relation to EDD benefits...

"The wages range from $0.30 to $0.95 per hour. In 1990, California passed Proposition 139, also known as the Prison Inmate Labor Initiative."

"Prison Labor in California State Prisons | AFSC Investigate" Web Link.

The $1B allocated towards 35,000 inmate-related EDD benefits was a 'windfall' for the incarcerees who filed for unemployment & chances are, these monies will never be fully recovered.


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