California officials estimate that prison inmates could have fraudulently made pandemic unemployment benefits of nearly $ 1 billion.
District Attorneys for the Sacramento, El Dorado, Kern and San Mateo counties convened a press conference on Nov. 23 to describe what they described as widespread unemployment fraud among inmates of the California Department of Corrections and Rehabilitation (CDCR) facilities in their counties .
A joint investigation between a statewide task force, the CDCR, and district attorneys found that inmates made 35,003 fraudulent claims through the state’s Department of Employment Development (EDD), which received federal funding to assist the unemployed due to the pandemic.
Over 20,000 of the claims filed have already been paid, representing over $ 140 million in fraudulent payments for claims filed between March and August. The highest single claim was $ 48,600. Officials are still investigating the fraud cases in each county and expect total losses could reach hundreds of millions or nearly a billion dollars, an amount that cannot be easily reclaimed.
“It may be and will be one of the largest taxpayers’ money frauds in California history,” said Anne Marie Schubert, District Attorney for Sacramento, at the conference, held in Sacramento and broadcast live 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 – have formed a statewide task force to investigate the issue. The investigation involved comparing a list of inmates with people who had applied for unemployment through the EDD, which uncovered the large-scale fraud.
“It exists in every CDCR prison. It includes all types of inmates. It includes death row inmates, ”said Schubert. “It includes inmates who have served or are serving a life or life without parole, clearly those not entitled to those benefits so badly needed by working families in this state affected by this pandemic will.”
Those individuals who are making claims and receiving illegal benefits include some high profile inmates like Scott Peterson, who was convicted of first degree murder in 2004.
Of the 700+ inmates on California’s death row, 133 inmates were named in fraudulent cases and paid over $ 400,000 as of August.
In San Mateo County, 22 people – 16 inmates and six people outside the prison system – were charged with fraud. San Mateo District Attorney Steve Wagstaffe said the fraudulent payments ranged from $ 250,000 to $ 400,000. So far, San Mateo County investigators have reclaimed $ 150,000.
In Kern County – which has five state prisons, most of them in California – about 4,000 requests for benefits have been made on behalf of inmates, according to Cynthia Zimmer, district attorney for Kern County. Of these applications, over 2,000 inmates received over $ 16 million in illegal benefits.
Officials said it would be an easy scam for inmates to take because they could easily apply for benefits online with basic identification information. They used their own names, false names, or the names of other inmates to apply.
In some cases, they used fake social security numbers or sought help outside of prison who made fraudulent claims on their behalf.
Individuals were then given EDD debit cards which they could use to collect cash from ATMs without identification.
Unlike 35 other states, California does not use a crossmatching system to screen the prison and prison population against people filing unemployment claims.
“This was a simple scam, but it’s a difficult crime to relax given the large number of people – thousands of inmates in state, local and federal institutions competing for it,” said Vern Pierson, District Attorney for El Dorado.
Pierson, who is also president of the California District Attorneys Association, said the association met with the then director of the EDD a few years ago to inquire about a crossmatching system. They were told that the tools for such crossmatching were in place but not being used.
An EDD spokesman said in an email on Tuesday that the agency is now working with the U.S. Department of Labor’s Inspectorate General to mix inmates with suspicious allegations.
“We are also pursuing the question of how such cross-matches can be integrated as part of increased prevention efforts in this unprecedented era of pandemic unemployment fraud across the country. In addition, EDD works with government cyber security experts, ”read the email response courtesy of Loree Levy, EDD’s Assistant Director of Public Affairs.
At the beginning of autumn this year, the EDD also introduced an identification verification system, which required applicants to upload identification documents and a self-photo for validation.
However, inmates were able to bypass this process by asking for help from people outside the prison system.
“We know they (inmates) are talking to each other about how easy it is to defeat this and how to work around the problem,” said Pierson.
“They’ll call someone outside, get a driver’s license, get another ID, and then the money will flow on.”
Pierson said ID verification was an improvement, but “not a general solution to the problem”.
Wagstaffe, the district attorney for San Mateo County, said the EDD worked with their local investigation over the summer, but were told that the fraudulent payments could not be stopped until the charges were formally brought in court.
This prompted Wagstaffe’s office to hasten the prosecution.
“After we had completed the investigation, we were able to charge within a few days,” said Wagstaffe in an interview on Tuesday.
“While normally, if you have the time, you could get to it over the weeks.”
In San Mateo County, one of the 22 defendants has been released on bail and six people have been convicted so far. Others are waiting for a hearing.
According to Wagstaffe, under California law there is a maximum sentence of three years for conspiracy crimes. For current inmates, the years have been added to their current prison term. There have also been cases outside of San Mateo County where inmates used other people’s identities to file claims on what constitutes a separate identity theft charge and carries its own penalty.
In addition, Wagstaffe said the convicts have been asked to provide a refund of approximately $ 25,000, which will be collected from their earnings.
Wagstaffe said San Mateo County’s numbers are relatively small – just 16 fraudulent claims out of the thousands of claims across the state. He expressed concern about areas where there are more cases to be investigated.
El Dorado County’s district attorney Pierson said that despite their best efforts, “the vast majority of money is never paid out” because there is “no practical way” for criminals faced with long sentences to ever return the money.
A group of prosecutors wrote to Governor Gavin Newsom Monday asking for his personal commitment to contain the fraud.
They asked Newsom to add resources and investigative personnel to the task force and to implement a crossmatch system.
The letter was signed by district attorneys in Sacramento, El Dorado, Lassen, Fresno, Monterey, Marin, Riverside, San Diego, and Ventura counties.
“It’s not just about the stolen money. It’s about the fact that we have to turn the tap off, which means we should stop paying these convicted criminals who are in jail, ”said Schubert, the Sacramento District Attorney. “If we turn this spigot off, we will reduce the amount of money that goes to these people.”