A scam involving the names and identities of tens of thousands of California prison inmates — including convicted wife murderer Scott Peterson — has apparently enabled scammers and some inmates themselves to make off with at least $140 million in state funds that were meant for gig workers and others during the pandemic.
Sacramento County District Attorney Anne Marie Schubert revealed the massive scam in a press conference Tuesday in which she asked for Governor Gavin Newsom to be personally involved in the investigation and prosecution of the crime. Schubert called it "what appears to be the most significant fraud on taxpayer funds in California history," per the Associated Press.
"The word I’ve used is behemoth," Schubert added. "This is massive."
The scam has been perpetrated across dozens of counties in the state in recent months, and it stems from the fact that California's Employment Development Department doesn't have a cross-check system to detect when a prison inmate tries to file an unemployment claim, as other states do. And it involves federal Pandemic Unemployment Assistance program funds, which were meant to be funneled to workers in California who were impacted by the pandemic downturn but did not qualify for traditional unemployment insurance benefits, due to their previous freelance status.
As the AP reports, prosecutors in Schubert's office were tipped off to the scam at first because of recorded conversations with prison inmates who were bragging about successfully filing claims.
"Quite frankly, the inmates are mocking us," Schubert said.
But the majority of the claims have reportedly been filed by scammers on behalf of inmates, or in these inmates' names — including some notorious convicted killers like Peterson, Yosemite quadruple-murderer Cary Stayner, and Southern California child-killer Susan Eubanks.
In total, at least 35,000 fraudulent claims are believed to have been filed between March and August, totaling $140 million. And the number is growing because the fraud is ongoing.
Schubert went public with the widespread fraud scheme, as the Chronicle reports, after "attempts to work with top officials at the state’s Employment Development Department have been unsuccessful."
Newsom issued a statement to the Chronicle acknowledging awareness the widespread fraud, and saying, "Unemployment fraud across local jails and state and federal prisons is absolutely unacceptable."
He added, regarding his dedicated strike team for unemployment claims, "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."
Signs of the fraud have apparently popped up in many places, and San Mateo County DA Steve Wagstaffe already charged 21 inmates with defrauding the EDD back in September. And in Kern County, the DA found that one address had been used to collect benefits in the names of 16 inmates.
District attorneys for the counties of El Dorado, Lassen, Fresno, Monterey, Marin, Riverside, San Diego, and Ventura all cosigned a letter from Schubert asking for Newsom's help and resources this week.
Kern County District Attorney Cynthia Zimmer said in a statement to the AP, "In my nearly four decades I have never seen fraud of this magnitude."
The revelation about this fraud caps off a year in which California's Employment Development Department has proven itself to be incapable of handling a mass unemployment crisis like this one — and this story will no doubt be frustrating to the tens of thousands of Californians who tried and failed to apply for benefits that they lawfully deserved because the EDD's systems were overwhelmed.
The state paused all unemployment benefits for two weeks in September in order to upgrade the EDD's computer system and address a backlog in claims.
San Quentin photo by Justin Sullivan/Getty Images