There’s Fraud, And Then There’s CALIFORNIA Fraud

Over the past months we Californians have seen all kinds of stories about the backlog of Employment Development Department (EDD) pandemic unemployment payments to residents, like this:

And this:

And this:

Clearly the stores were fake news, because we now know that thousands of people were receiving pandemic unemployment payments:

Inmates in California’s jails and prisons were receiving EDD benefits.

How many inmates?  How much money did they receive?

It started out small, back in August:

The fraud was explained in an August 15 news release from the San Mateo County Sheriff’s office:

The fraud consisted of 21 people, about half incarcerated in the San Mateo Maguire Correction Facility and the others spread across three counties.

The amount was at least $250,000.

The mastermind – if there was one – was not named.  And perhaps none was needed, because the process wasn’t complicated.  According to the New York Times article,

“Inmates filed unemployment claims – some using county-issued iPads provided in jail – with the California Employment Development Department.  Others provided personal information in phone calls to people on the outside who filed for unemployment on their behalf.

“The money was then deposited into a bank account of their choosing.  Friends or family members withdrew the cash for some, while others did it themselves after they were released, according to Stephen M. Wagstaffe, the San Mateo County district attorney.

“In some cases, the money was spent on ‘remarkable personal items’ including expensive clothing and a trip to Las Vegas, he said.”

This angered people, and rightly so.  Many had been waiting weeks and months for financial help to stave off the effects from the pandemic, including job loss and eviction threats.

But take heart – it was only this small group in this one facility, and see?  They’d been caught.  And according to the Sheriff’s news release, $150,000 was recovered during the execution of search warrants.

Contained, case closed.

Until this story broke on November 24:

According to the story:

“At least 35,000 unemployment claims have been fraudulently made on behalf of prison inmates between March and August, costing the state [read:  taxpayers] $140 million in paid-out benefits, California officials said Tuesday.  

“Prosecutors said they learned of the scheme from listening in on recorded prison phone calls, where inmates would talk about how easy it was for everyone to get paid.  They said the scheme always involved someone on the outside to facilitate the applications.”

What seemed like a lot of money in August – upwards of $250,000 – had now grown to $140M, called “staggering” in this article:

And instead of being limited to one jail, the fraud was now known to have spread to “every California Department of Correction and Rehabilitation (CDCR) prison,” said Sacramento County District Attorney Anne Marie Schubert. 

And not just staggering – but bizarre:

Claims had been filed under the name of Wesley Shermantine, a notorious killer, and Scott Peterson, convicted of murdering his wife and unborn son.

Claims had been 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.”  

That was November 24.  Over the next several days, California officials mulled over 35,000 fraudulent claims and $140 million in paid-out benefits to inmates including convicted murderers – and Poopy Britches.

And then came this December 1 story:

The article states,

“The California Labor and Workforce Development Agency confirmed Tuesday, December 1 that California has sent about $400 million in unemployment benefits to state prison inmates.  In all records show 31,000 inmates have applied for benefits and about 20,800 were paid $400 million.  A group of local and federal prosecutors said 133 inmates on death row were named in claims.”

Tax Dollars Recap:  August: $250,000.
November: $140M.  December: $400M.

Riverside County District Attorney Michael Hestrin said, “We’re continuing to uncover more fraud, and the scale of it is frankly stunning.”

“Stunning,” indeed. 

On December 3, an article in the San Diego Union-Tribune suggested that some of the proceeds of what was now being called the biggest taxpayer fraud in California history “have been sent to other counties and even other states.” 

Then this December 4 article in the Los Angeles Times took that even further:

Tax Dollars Recap:  August: $250,000.  December:  $1B.


“The practical reality,” said El Dorado County District Attorney Vern Pierson, “is the vast majority of this money will never be repaid.”

No surprise there.

And no surprise here:

The blame game roared to life:

  • California Governor Newsom blamed the fraud in part on Congress’ decision to expand unemployment benefits during the pandemic while mostly relying on applicants to self-certify that they were eligible.
  • Multiple district attorneys were blaming state officials, including state Attorney General Xavier Becerra, for not taken leadership in the biggest taxpayer fraud in California history.

(On December 7 President-Elect Biden named Becerra as his nominee for Secretary of Health and Human Services, so I guess Becerra has other priorities?)

  • Prosecutors are blaming the dysfunction of the EDD that they said has hindered their investigation.
  • The EDD is blaming the state, because a state law that forbids the prison system from giving out inmates’ Social Security numbers.  State officials got around that law by convincing the Office of the Inspector General at the U.S. Department of Labor to issue a subpoena for the information in late September.  When EDD started comparing, the numbers leapt from $140 to $400 million.
  • The EDD is also blaming – at least indirectly – the pandemic, which put it under intense pressure to quickly process millions of claims as the economic impact from the coronavirus intensified last spring.
  • I suppose everybody is blaming Sharon Hilliard (pictured), appointed director of the EDD in February 2020.  After a mere nine months on the job, in late October Hilliard announced her retirement, effective December 31, 2020, saying, “I retire knowing that EDD is on a great path to success.”

In her announcement Hilliard made no mention of the prisoner fraud, or of Poopy Britches.

It may be a comfort to some that Governor Newsom has formed a task force to investigate.

Until you remember the definition of a task force:

“A group of people in a room with a white board, who agree on nothing except to postpone doing anything until next month’s meeting.”

A December 3 editorial in the Union-Tribune said that as of the previous week, EDD had a backlog of 590,000 claims.

Those Californians have been – understandably – upset as the inmate fraud story has unfolded and expanded.

Californians like Shane Steckelberg, who was furloughed during Thanksgiving week and whose work contract ends after the holidays:

He’s been trying to apply for unemployment since November 21, but every day is met with long wait times delaying the process to verify his identity.  Steckelberg is baffled that inmates are scamming EDD and he cannot even get his application approved: 

“It’s frustrating.  I never applied for unemployment in my life.  Ever.  And so the fact that people are in jail and get these benefits immediately just blows my mind.

“We just don’t know what’s going to happen over the next few months,” he said.

This, and thousands more like Shane, while at the same time, EDD has paid $1B of our tax dollars – and perhaps more – in fraudulent claims to tens of thousands of inmates and their cronies, to people out of state and even outside the country.

I think the Union-Tribune editorial said it well when it summed up the EDD mess this way:

“…not helping the hurting, and helping those who deserve no help at all.”

The editorial’s headline used the word “fiasco.”

I have another “F” word in mind:

Update: December 8, 2020:

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