Inmates at California’s prisons and jails have filed hundreds of millions of dollars worth of fraudulent claims since the pandemic arrived, Sacramento County District Attorney Anne Marie Schubert said Tuesday.
Investigators are still tallying totals after learning of a widespread scheme in September, but the amount of fraudulent claims the state has paid could reach $1 billion, Schubert said in a news conference in Sacramento.
“It is perhaps, and will be, one of the biggest fraud(s) of taxpayer dollars in California history,” she said.
Just from March through August, 35,000 claims were filed in the name of inmates at state prisons, she said. About 20,000 of those claims have been paid, she said, amounting to $140 million in fraudulent payments.
The highest amount paid was about $49,000, and one inmate filed 16 claims, she said.
Those involved have filed claims under addresses in California, other states and even other countries, Schubert said. In some cases, the addresses used for claims were California Department of Corrections and Rehabilitation prisons, she said. Some used false names and some used true names.
Murderers, rapists, child molesters and death row inmates have been among the claimants.
“It exists in every CDCR prison, it encompasses every type of inmate,” she said.
The district attorneys said claims were filed in the names of Scott Peterson, who was convicted in 2004 of killing his wife Laci Peterson and their unborn son; Royal Clark, who was convicted in 1994 of killing 14-year-old Laurie Farkas; Isauro Aguirre, who was convicted in 2018 of murdering eight-year-old boy Gabriel Fernandez because he thought he was gay; Susan Eubanks, who was convicted in 1999 of killing her four sons; Wesley Shermantine, who was convicted of killing two men and two women in 1984; and Wayne Ford, who confessed to killing four women in 1997 and 1998 and walked into a sheriff’s office with a woman’s severed breast in his pocket.
Beyond the state prisons, the fraud has occurred in local jails and federal institutions, Schubert said.
Schubert participated in the announcement along with district attorneys from El Dorado County, Kern County and San Mateo County. U.S. Attorney for the Eastern District of California McGregor Scott also participated.
San Mateo County District Attorney Stephen Wagstaffe said his office started investigating fraud at San Mateo County Jail after one of his investigators working on a separate case overheard an inmate discussing the scheme.
Wagstaffe said his office has charged 22 inmates in the scheme, which he said spread quickly across institutions.
“Like any pandemic, it spread all over our incarcerated facilities,” he said.
The district attorneys said neither the Employment Development Department nor Gov. Gavin Newsom have done enough to to try to stop the fraudulent payments, which are ongoing.
Wagstaffe said the department won’t stop payments until criminal charges have been filed.
“They could not cut these people off,” Wagstaffe said. “The fraud was ongoing as we were investigating.”
Schubert called the department’s response “slow and nonexistent,” at least in its response to the group of investigators who are coordinating their efforts across the state. She said the group has received little response from EDD’s top-level management.
She said Newsom should look to other states for solutions, and said Sacramento County cuts off welfare benefits for people in jail.
In an emailed statement, Newsom said that when evidence of fraud in correctional facilities came to light, he directed EDD to “review its practices and to take immediate actions to prevent fraud and to hold people accountable when fraud is not prevented.”
He said those efforts have included expanding efforts to use Social Security numbers to identify inmates who are ineligible for payments. He said he also has directed the Office of Emergency Services to create a task force to coordinate state efforts and support the district attorneys.
“Unemployment fraud across local jails and state and federal prisons is absolutely unacceptable,” Newsom said in the statement.
The vast majority of the stolen money has come from the federal government, which expanded unemployment insurance programs early in the pandemic, including $600 in supplemental weekly payments on top of state unemployment insurance money.
The state is responsible for making sure the money is spent correctly, said McGregor Scott, the U.S. District Attorney.
Nonetheless, the complex, widespread nature of the scheme involving tens of thousands of people will make it difficult to recover the stolen money, said El Dorado County District Attorney Vern Pierson.
“The practical reality is the vast majority of this money will never be repaid,” Pierson said.
Employment Development Department investigators, along with local, state and federal partners, have been looking into potentially fraudulent schemes for months. “Fraud attempts have increased during the pandemic,” EDD said in a statement in September.
The alleged fraud comes amid a historic surge in unemployment claims in California that has overwhelmed the department.
The department has processed 16.4 million claims since March, according to a recent news release. It is working through a backlog of unprocessed unemployment claims that reached as many as 1.6 million claims.
A September report from a strike team Newsom created to fix problems at the department underscored the balancing act it faces in processing claims quickly while catching fraudulent claims. The report did not address fraud involving prisoners.
The department has pointed to figures showing an increasing share of fraudulent claims. Between January and June, legitimate claimants responded to 60% of notices requiring additional documents. By July, though, the response rate dropped to 15% and in August, 9%, according to the department.
Part of the problem, the California state auditor said, was that EDD continues to include full Social Security numbers on many of its mailings. The auditor warned EDD in March 2019, a year before the pandemic sent unemployment claims surging, that including the number could put identities at risk.
Last week, an updated audit said EDD had not done enough to protect identities. The audit said Social Security numbers were still being routinely included in mailings.
“EDD’s failure to change its business practices in a timely manner has unnecessarily put claimants at increased risk of identity theft,” the audit said.
District attorneys said Tuesday that the Social Security numbers in the mail are only “tangentially related” to the fraud scheme among inmates.
This story was originally published November 24, 2020 11:26 AM.
