‘The fraud is honestly staggering’: District attorneys announce multi-county EDD fraud case within jails, prisons

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SACRAMENTO, Calif. (KTXL) — Convicted killers and other prisoners are collecting cash that was meant for hardworking Californians out of a job. 

District attorneys announced Tuesday a massive fraud scheme involving the state’s Employment Development Department and inmates across California. 

“It is perhaps and will be one of the biggest fraud of taxpayer dollars in California History,” said Sacramento County District Attorney Anne Marie Schubert. “That money was stolen from the coffers of the California state government.” 

Schubert announced that from March to August, inmates across the state filed at least 35,000 fraudulent claims for unemployment benefits. 

The EDD has already paid out 20,000 of those claims, mounting to well over $140 million in benefits.  

“It exists in every CDCR prison. It encompasses every type of inmate. Quite frankly the inmates are mocking us,” Schubert said. 

San Mateo County District Attorney Stephen Wagstaffe said they first learned of the fraud in July after hearing an inmate discussing his plans over the phone. 

In many cases, they believe prisoners are working with family and friends on the outside who file the claims on their behalf. 

The conspirator then collects the bank card, cashes it and sends a money order to the inmate. 

“It’s open and notorious in the correctional facilities, being discussed about how everybody is getting paid,” said El Dorado County District Attorney Vern Pierson. 

The district attorneys said the claims have been filed and paid out under the names of notorious killers like Wesley Shermantine, who was dubbed one of the “Speed Freak Killers” in San Joaquin County. 

Another was filed under Scott Peterson’s name, who was previously convicted of murdering his wife and unborn son. 

Some of the claims are filed under false names. 

“John Doe or John Adams, or in one case somebody had the audacity to put their name as ‘Poopy Britches,’” Schubert said.  

These district attorneys are calling on Gov. Gavin Newsom to step in and institute new measures to fight this fraud. 

They say California should have a system to cross-reference incarceration data against EDD claims like more than 30 states across the country already do. 

Newsom said after learning of the first fraud case in San Mateo, he told EDD to work with the California Department of Corrections and Rehabilitation to start a data match of social security numbers. 

Newsom issued a statement later Tuesday:

Unemployment fraud across local jails and state and federal prisons is absolutely unacceptable. Earlier this year, I launched a strike team to expedite unemployment payments and to minimize abuse of the system. 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 when fraud is not prevented. Based on that direction, EDD and CDCR, in partnership with USDOL worked to match social security numbers of those in state custody to identify the scope of the problem and to hold people accountable. To expedite and strengthen these efforts I have directed the Office of Emergency Services to stand up a task force to coordinate state efforts and support investigations by local District Attorneys. We will continue to fully partner with law enforcement and direct as many resources as needed to investigate and resolve this issue speedily. While we have made improvements, we need to do more. 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.

Governor Gavin Newsom

Attorneys said they plan to prosecute these cases and try to get back any of the money they can, however, they said it’ll be an uphill battle and most of the money is likely gone. 

FOX40 reached out to the EDD and the department responded with the following statement:

EDD has been working with the assistance of the DOL OIG on cross-matches with inmate populations to identify suspect claims.  We’re also pursuing how to integrate such cross-matches 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. 

Loree Levy, Employment Development Department Deputy Director of Public Affairs

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