In a year in which California's unemployment department saw massive failures in its system while inundated with claims from those impacted by the COVID-19 pandemic, it's now facing more backlash after
Prosecutors say prison and jail inmates requested and received hundreds of millions of dollars in unemployment funds from the California Employment Development Department (EDD), in what could be the biggest taxpayer fraud scheme in state history.
“There was money sent actually to prisons,” said Sacramento County District Attorney Anne Marie Schubert. “Paid and sent to inmates in prison. There’s evidence that true names of inmates and true social security numbers have been used,” as well as fake names, including John Doe and Poopy Britches, she said.
Schubert said the fraud encompasses every state prison and “every type of inmate,” including people sentenced to life without parole as well as 133 death row inmates. The fraud scheme is “rampant” in county jails, too, prosecutors said.
District Attorneys from nine of California counties say the problem could have been avoided if the EDD crossmatched its list of claimants with state and county inmate rolls.
“When we saw evidence of fraud in correctional facilities, I directed the Employment Development Department to review its practices and to take immediate actions to prevent fraud and to hold people accountable,” Newsom said in a prepared statement.
“While we have made improvements, we need to do more,” he said. “Everything the state does will be done in partnership with the local District Attorneys and I thank them for their commitment to resolving this issue as quickly as possible.”
Prosecutors compared a list of every inmate in the California Department of Corrections and Rehabilitation (CDCR) system with a list of EDD claims filed from March through August and found more than 35,000 claims made to prison inmates, totaling more than $140 million.
The prosecutors praised CDCR officials for their cooperation to track down fraudulent payments, but said there was “slow, if nonexistent” efforts from EDD officials to assist in investigations.
Vern Pierson, El Dorado County District Attorney and president of the California District Attorneys Association, said the statewide DA’s association was told about five years ago by a previous EDD director that a cross check tool existed to prevent this type of fraud, but that check is not happening currently.
“This is a very, very simple way of fraud to perpetuate,” Pierson said. “But nothing could have told us the magnitude of this fraud.”
In San Mateo County, District Attorney Stephen Wagstaffe said his investigators uncovered more than 22 jail inmates participating in the scheme, receiving upwards to $500,000 in taxpayer unemployment benefits.
“If this level of fraud can go on in a small county jail like San Mateo County Jail, you know that it’s massive in other spots,” he said.
Wagstaffe described an inmate who learned of the scheme in the San Mateo County Jail and “was spreading the news” when he was transferred to a state prison. “Like any pandemic, it spread all over our incarceration facilities.”
Wagstaffe said when he brought his investigation to EDD officials, he was told that they could not stop the payments until charges were filed.
The allegations represent another black eye for the EDD, which has been plagued by problems including fraud and payment backlogs since the pandemic began.
The agency did not immediately respond to a request for comment.
The California District Attorneys Association wrote a letter to Gov. Gavin Newsom requesting he intervene personally to halt the fraudulent payments.
Newsom’s so-called strike team focused on fixing EDD’s issues recommended changes within the agency to clear claim backlogs and prevent fraud, but did not address fraudulent payments within the prison system. The prosecutors asked Newsom to provide more resources to their task force investigating the fraud and to require EDD to cross match its claimants to prevent future fraud.
“By immediately addressing these systemic issues, those rightfully entitled to and desperately in need of unemployment benefits will obtain the assistance needed,” the letter reads.