Calif. Inmates Have Claimed $1B In Jobless Benefits, DAs Say

By Hailey Konnath
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Law360 (November 24, 2020, 11:09 PM EST) -- Tens of thousands of inmates in California's jails and prisons have fraudulently claimed more than $1 billion in unemployment claims during the COVID-19 pandemic, a massive scheme that a coalition of district attorneys on Tuesday said may be the biggest fraud of taxpayer dollars in Golden State history.

The California Employment Development Department has paid out tens of thousands of fraudulent claims from local, state and federal inmates between March and August, Sacramento County District Attorney Anne Marie Schubert said at a press conference Tuesday. The claims were filed using true names and Social Security numbers as well as fake ones, some as blatant as "John Doe" and "John Adams," Schubert said.

She called the scope of the alleged fraud "honestly staggering," adding that it exists in every prison and encompasses every type of inmate. Among the high-profile inmates who received COVID-19 unemployment relief are Scott Peterson, who was convicted of killing his pregnant wife in 2004, and Cary Stayner, who was convicted of killing four women near Yosemite National Park, Schubert said.

However, it's unclear whether those high-profile individuals were victims of the scam themselves or willing participants, according to the nine district attorneys and California federal prosecutor who've been investigating the matter.

According to an investigation that involved district attorneys, federal prosecutors, and local, state and federal law enforcement, more than 35,000 claims were lodged by state prison inmates between March and August. The agency has paid out about 20,000 of those claims for a total of $140 million, Schubert said. Among death row inmates, the agency has paid out nearly 160 claims worth more than $421,000, she said.

The fraud in county jails and other detention facilities, like state hospitals, is also rampant, according to the probe.

Elected district attorneys from Sacramento, El Dorado, Lassen, Fresno, Monterey, Marin, Riverside, San Diego and Ventura counties sent a letter to California Gov. Gavin Newsom on Monday requesting significant resources and investigative staff to help combat the allegedly "widespread" fraud.

"The enormity of this work cannot be underscored enough," the DAs wrote in the letter. They continued, "Fraudulent unemployment claims deny those who have lost their employment, many due to COVID-19, who are legally eligible for benefits and are truly in need from getting the financial assistance they need."

The DAs formed a statewide EDD fraud task force to tackle the problem and said they've received help from the EDD itself. But the EDD only has a total of 17 fraud investigators and are "understandably overwhelmed" by the work ahead, the task force wrote in the letter.

At Tuesday's press conference, El Dorado County District Attorney Vern Pierson criticized the "dysfunctionality" within the EDD. While the fraud investigators have been helpful, there's a lack of responsibility when you go up the chain of command, he said.

Notably, Pierson and the other DAs said California lacks a system to crossmatch jail and prison data with unemployment benefits claims. A slew of other states use such systems, but California does not, the DAs said.

"That's how this happens," Schubert said.

In a statement provided to Law360 on Tuesday, Newsom called the alleged fraud "absolutely unacceptable."

"We will continue to fully partner with law enforcement and direct as many resources as needed to investigate and resolve this issue speedily," he said. "While we have made improvements, we need to do more."

The governor said he's directed the EDD to review its practices and take immediate actions to prevent fraud and hold people accountable. He's also directed the Office of Emergency Services to form a task force to coordinate state efforts and support the district attorneys, according to the statement.

The EDD didn't immediately return a request for comment late Tuesday, however, Loree Levy, a spokesperson for the agency, told the Los Angeles Times that it is trying to weed out claims from ineligible incarcerated individuals.

The EDD is "pursuing how to integrate such cross-matching moving forward," Levy said.

Pierson said during the press conference that this "is a very, very simple way of fraud." All that is needed is "relatively straightforward identifying information," he said. That could even include fake Social Security numbers and addresses within institutions, he said.

He added, "It's open and notorious within the correctional facilities."

--Editing by Michael Watanabe.

For a reprint of this article, please contact reprints@law360.com.

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