California unemployment benefits fraud: who stole from the state?

An investigation across multiple agencies announced Tuesday that they had uncovered a massive breach of the pandemic economic relief system across the state of California. The task force says that this “what appears to be the most significant fraud on taxpayer funds in California history.”

In total, 35,000 unemployment claims were filed in the name of California state prison or jail inmates between the months of March and August. It appears at least 20,000 of those have already been paid out, and that the money is already flowing out of the state and country. It is expected that the vast majority of the money will never be repaid.

In most cases, investigators said, the payments were sent in the form of prepaid debit cards to addresses designated on the applications, with the proceeds later deposited to inmate accounts in jail and prisons, but in some, the benefits were sent directly to the prisons themselves.

The investigation was carried out collaboratively between Sacramento, El Dorado, Kern and San Mateo county district attorneys and McGregor Scott, the US Attorney for the Eastern District of California. The federal government also have a number of cases open involving unemployment fraud.

Who was involved in the fraud?

The scale of the fraud has led officials to believe that sophisticated crime rings involving multiple jails and prisons in California masterminded the operation. Payments have been made in the names of tens of thousands of inmates.

According to analysis by The New York Times, among the named beneficiaries are Cary Stayner, a serial killer who murdered four women near Yosemite National Park in 1999; Wayne Ford, another serial killer, who confessed to at least four murders in 1997 and 1998 in Northern California; Scott Peterson, convicted in 2004 of the murder of his pregnant wife, Laci; and Isauro Aguirre, who, with his girlfriend, tortured and murdered her 8-year-old son, Gabriel Fernandez, in 2013 in Palmdale.

California benefit fraud: what happens now?

Multi-agency investigations are ongoing with the support of state resources, and 22 people have been charged so far in San Mateo county alone. However, there are fears that the money may continue to be paid to inmates fraudulently without state government intervention.

Sacramento County District Attorney Anne Marie Schubert raised concerns talking to Politico about the potential lack of cross checks being carried out between identities of claimants and inmates. Schubert has called on Governor Gavin Newsom to tighten the gaps.

"It’s not just about the money that’s been stolen," Schubert said. "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. ... We have asked and implored the governor to get involved himself to turn the spigot off."

Newsom responded in a statement Tuesday, thanking district attorneys for their commitment and admitting that “we need to do more”. "When we saw evidence of fraud in correctional facilities," he wrote, "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."

Newsom has also deployed a task force out of his Office of Emergency Services to support the investigations in process across the state.

An Employment Development Department spokesperson said the department had worked with federal labour officials to identify suspicious claims and that it was "pursuing how to integrate such cross-matches moving forward" to prevent abuse "during this unprecedented time of pandemic-related unemployment fraud across the country."

Widespread covid-19 benefit fraud: it’s not just California

At the height of the coronavirus health crisis this spring in the US, unemployment reached highs of 23 million in April, so by May 2020, 30 million claimants were receiving benefits nationwide.

This behemoth scale has left the system open to abuse. In Washington state, 87,000 impostor cases have been discovered since March, whereas in the 18 months to June 2019 there were 184. While Arizona officials suspect that over 40 per cent of their almost 2.5 million claims are fraudulent, and Colorado uncovered 77 per cent illegitimate Pandemic Unemployment Assistant claims.

With regular state unemployment claims, there is a built-in verification process, where employees submit a W-2 tax form and a document from their employer showing that they are no longer employed. Pandemic Unemployment Assistance, by contrast, depends largely on individuals’ self-certifying that they are unemployed because of the coronavirus outbreak.