$225,000 and counting: Contra Costa jails were hotbed for EDD fraud [Bay Area News Group]
San Jose Mercury News (CA)
MARTINEZ — When authorities in Contra Costa County began searching for evidence of unemployment insurance fraud related to the COVID-19 pandemic, they didn’t have to look very far.
Many of the fraud suspects were already in custody at the county jail, where inmates have collectively brought in more than $225,000 from California’s Employment Development Department, according to court records obtained by this news organization. Authorities with the EDD as well as the Contra Costa Sheriff’s Office are currently investigating more than a dozen current and former inmates said to have filed false claims.
The schemes were simple, and word that people were getting easy money from the state appeared to spread quickly throughout the jail: To file a fake EDD claim, all the fraudsters had to do was claim to be unemployed because of the pandemic and hope that the department cashed them out without investigating the claim, authorities said.
The claims were referred to the sheriff by an EDD investigator, who determined that several inmates at the Martinez and Richmond jails had applied for and received benefits during the COVID-19 pandemic, when EDD was facing pressure to churn out millions of unemployment claims across California. By the time the alleged fraud was discovered at the beginning of this year, the checks had already been cashed.
The cases are part of a trend that was seen in jails and prisons across the state — including in the Bay Area — in 2020 and 2021, when the state’s pandemic unemployment insurance program ended. Federal prosecutors in Sacramento have filed more than a half-dozen cases involving alleged EDD fraud by state prisoners, including one eight-defendant case in which an estimated $25 million was siphoned from the state’s unemployment system by inmates in multiple state prisons.
A 2021 report by California’s Joint Legislative Audit Committee and the Assembly Insurance Committee blasted EDD for both failing to pay out legitimate claims in a timely manner and allowing a massive amount of fraud during the height of the pandemic. State Assemblyman Mark Berman (D-Menlo Park) called the findings “egregious” and evidence of the agency’s negligence.
According to investigators, some fraud rings mirrored drug trafficking organizations, where the organizers delegated lower-tier co-conspirators to assignments like submitting false claims or transferring funds via digital cash apps. Some prisoners were even found with handwritten documents inside their prison cells that contained large lists of fraudulent claims and tallies of payouts.
Former EDD director Michael Bernick blamed the fraud, in part, on the “hastily” created federal Pandemic Unemployment Assistance program, which allowed independent contractors to receive unemployment benefits, opening the floodgates for fake claims.
“The way the process was set up, you basically almost self-certified,” said Bernick, who is now an attorney in San Francisco. “All you needed to show was that your income went down, it didn’t need to go down a certain amount. On top of that there was a real push to get money out as quickly as possible…That’s one of the lessons of the enormous fraud we saw.”
In Contra Costa, several of the EDD fraud suspects were in jail facing murder charges and discussed the fraud schemes on jail phones, knowing full well those phones are recorded, according to EDD investigators. Those suspected of EDD fraud included an alleged leader of a local gang who made $24,618 while facing murder charges, as well as a Richmond man tied to two gang-related shootings and a robbery of a rapper’s entourage, who brought in $10,000 in fraudulent EDD money, according to authorities. A member of a Rodeo-based Irish-American street gang allegedly pulled in $31,800 while facing a conspiracy case, and a woman suspected of killing a fellow motorist in a drunk driving crash in Crockett allegedly made $19,682, court records show.
In addition, several members of the Concord Surenos — a gang that was the target of a massive federal and state investigation into drug trafficking and multiple homicides in the East Bay — filed a half-dozen claims that brought in $15,000-$40,000 each, according to investigators.
The EDD is also tracking 52 false claims, totaling $966,000, made by someone in Rodeo who used the names of California prisoners — including notorious convicted murderers like Scott Peterson and Carl Stayner — to file fake unemployment claims, court papers say.
Asked about the prevalence of EDD fraud in county jails, Contra Costa Sheriff’s office spokesperson Jimmy Lee said in an email that he only knew of “one case in the fall of 2020.” When presented with specific information about the roughly $225,000 allegedly stolen by jail inmates at different times in 2020 and through 2021, Lee responded, “one case can have multiple suspects.”
Asked why so many California prisoners received millions of payouts through fake claims, the EDD provided an unattributed statement saying that “inmate-related benefit fraud has been significantly reduced, if not outright eliminated,” due to the formation of a federal and state task force that includes the FBI and the California Department of Corrections and Rehabilitation.
“As a result of the task force’s efforts, data sharing agreements with law enforcement partners were developed to help expedite benefit fraud investigations,” the statement says. “Similarly, EDD established an information sharing program that helps California agencies to access EDD data more quickly.”