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."